Former RBI Governor Rajan Warns Against Using Reserves to Prop Up Rupee
Former RBI Governor Raghuram Rajan advises India against depleting foreign exchange reserves to defend the rupee amid ongoing currency depreciation.
POLICY WIRE — Mumbai, India — Former Reserve Bank of India Governor Raghuram Rajan has cautioned the government against aggressively depleting foreign exchange reserves to shield the rupee from market volatility.
In an interview conducted on Tuesday, October 27, 2026, Rajan advised policymakers not to “fixate on a number” regarding the currency’s valuation. He emphasized that the nation should avoid panic as the rupee navigates a challenging economic landscape.
The Indian rupee has faced significant pressure throughout 2026, recording a decline of approximately 6% in value. The currency hit a historic low of 96.96 in May, and reports indicate that reserves have already dropped by half of the $140 billion accumulated earlier this year.
Rajan noted that allowing for some currency depreciation could actually serve as a strategic benefit. He suggested that a weaker rupee helps stabilize exports and enhances the global competitiveness of Indian goods.
Looking ahead, the former central bank chief warned that sustained high oil prices could pose a threat to the economy by widening the current account deficit. He urged officials to maintain a balanced approach rather than exhausting vital financial buffers to defend a specific exchange rate.
Reporting by Policy-Wire (PW)
