Government Officials Cite Adaptability of Economy to Currency Fluctuations

Government Unfazed by Rupee's Decline Against Dollar

The Central government remains calm in the face of the rupee's depreciation against the dollar, with officials stating that a weaker rupee makes exports "more competitive". Two government officials told Moneycontrol that the downward movement is gradual and market-driven, and the economy is capable of adjusting to it.

India's forex reserves stood at $697 billion for the week ending May 8, providing the Reserve Bank of India (RBI) with adequate reserves and policy tools to manage excessive volatility whenever required. The rupee fell to a low of Rs 96.17-a-dollar on May 18, following a jump in US yields and oil prices trading above $110 a barrel, as well as fresh developments in the West Asian conflict.

The Indian currency has declined 5.5 percent against the US dollar since the Iran war began on February 28. Between February 28, 2026 to May 18, 2026, the rupee has declined from Rs 91.15/ $ to Rs 96.17/$.

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Analysts from Finrex Treasury Advisors have warned that only a stoppage of the war and reopening of the Strait of Hormuz can bring about a lower demand on the dollar/rupee pair, or else Rs 100 per dollar could be on the cards if the RBI does not announce any schemes to increase dollar inflows into the country.

A weaker rupee supports export competitiveness – much needed at a time when Indian companies are diversifying into newer global markets. In April 2026, India's total exports (merchandise plus services) stood at $80.8 billion, up 13.6 percent from the same month of last year.

The Economic Survey 2025-26 had noted that a weaker exchange rate is beneficial for India's trade balance. "A one per cent appreciation of the Rupee results in net total trade declining by 1.26 per cent. Conversely, if the Rupee weakens, the trade balance improves substantially," the survey had noted.

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According to officials, in several sectors, especially labour-intensive and manufacturing-linked exports, currency depreciation improves price competitiveness and gives Indian companies better access in overseas markets. The export basket today is far more diversified than it was a decade ago, with Indian exporters seeing deeper penetration into markets across Africa, Latin America, West Asia, and parts of Europe.

According to a Moneycontrol analysis, in November and December 2025, exports to markets such as China, Hong Kong, Vietnam, Malaysia, Spain, France, and Germany surged, with growth to some destinations exceeding 60 percent compared to the year-ago period. In December, shipments to the US fell 1.8 percent year-on-year but exports to key markets surged, with China up 67 percent, Malaysia 65 percent, Hong Kong 61 percent, Spain 48 percent, Vietnam 19 percent, Germany 9.8 percent, and Belgium expanding 8.9 percent.

"India's external sector remains far more resilient compared to previous global commodity shock cycles. Services exports continue to remain strong, remittance inflows are healthy, and several manufacturing sectors are seeing export traction. Currency adjustment, to some extent, supports this transition," the second official added.