India’s Rupee Undervalued Relative to Fundamentals, Says Top Economic Official

India’s chief economic adviser has stated that the rupee is “fundamentally undervalued,” emphasizing that current exchange rate levels do not fully reflect the country’s strong macroeconomic position.

Speaking in recent interactions, V. Anantha Nageswaran, Chief Economic Adviser to the Government of India, said the rupee’s depreciation should be viewed in the context of a broader global dollar rally rather than domestic fragility. He noted that despite the currency trading near record lows against the US dollar, India’s economic fundamentals remain robust.

The Economic Survey 2025-26 reinforces this view, stating that the rupee is “punching below its weight” despite India’s strong growth, contained inflation, and healthy balance sheets. The survey acknowledged a paradox where the currency’s valuation fails to reflect what it describes as India’s “stellar economic fundamentals,” even suggesting that an undervalued rupee may not be detrimental in the current global environment.

India’s economy is projected to grow at around 6.5–7% in FY26, positioning it among the fastest-growing major economies globally. The country’s nominal GDP stands at roughly $3.7–3.8 trillion, supported by strong foreign exchange reserves and stable macroeconomic conditions.

Although the rupee has faced pressure from persistent foreign outflows and global uncertainty, officials have downplayed concerns, highlighting that the currency’s current levels could present an attractive entry point for long-term investors.

Analysts note that the rupee’s depreciation has largely tracked the strength of the US Dollar Index, which has remained elevated due to higher US interest rates and global market volatility. Despite this trend, India’s external liabilities remain low, liquidity conditions are comfortable, and policy momentum continues to be reinforced by what the Economic Survey describes as “policy dynamism and purposeful governance.”

The consensus among official sources is that while the rupee may appear weak in foreign exchange markets, its valuation does not align with the underlying strength of India’s economy, creating a potential opportunity for investors who look beyond short-term currency movements.