Rupee has scope to stabilise, appreciate: RBI deputy governor Poonam Gupta

Reserve Bank of India deputy governor Poonam Gupta stated the rupee's depreciation over the past year and a half may be temporary, with the currency potentially stabilising and appreciating in the future. The rupee has fallen 13.1% between March 31, 2025 and September 16, 2026, despite India's economy being poised for 7-8% real growth.

Gupta, speaking at an event in Mumbai, did not provide a timeline for the appreciation. She believes the rupee may not only stabilise but also appreciate, as market analysts anticipated when capital flow measures were first announced. The currency closed at 95.74 on Wednesday, having hit a record low of 96.96 in late May, after RBI and government measures to attract inflows helped stabilise it.

Gupta also noted India's balance of payments is expected to improve, with a current account deficit (CAD) of less than 1% of GDP, managed by services exports and remittances. However, rising oil and gold prices have temporarily widened the CAD, while the capital account surplus has fallen short of the deficit in recent years, leading to a $5 billion deficit in 2024-25 and $23.6 billion in 2025-26.

Gupta anticipates the capital account to become more favourable later this financial year, driven by increasing foreign direct investment, strong corporate and bank balance sheets, and recent efforts to attract foreign capital. She also pointed out a disconnect between India's strong real economy growth and the underperformance of some financial markets, which she attributes to short-term return considerations.

This disconnect may be temporary, and as global shocks ease and India's economic relative valuations become more competitive, the economy's strength may start to reflect more in financial markets.