An undervalued rupee advantageous as it offsets the impact of higher American tariffs on Indian goods: Economic Survey

The Economic Survey document noted that the Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it. India depends on foreign capital flows to maintain a healthy balance of payments. When they run drier, rupee stability becomes a casualty, it noted. The rupees valuation does not accurately reflect Indias stellar economic fundamentals. In other words, the rupee, therefore, is punching below its weight, the Survey stated as INR holds near record low of around Rs 92 per dollar mark currently.

It does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now, the Economic survey noted. However, it does cause investors to pause.

Meanwhile, the survey further stated that widened BOP deficit, coupled with market uncertainty over the outcome of a trade deal with the US, has exerted pressure on the Indian Rupee, causing it to weaken. Between April 1 and January 22, 2026, the Indian rupee depreciated by approximately 6.5 per cent against the US dollar. However, the movement in the INR has been orderly. Over the medium to long term, exchange rate dynamics are expected to be guided by structural fundamentals, such as productivity gains, export diversification towards higher-value goods and services, deeper integration into GVCs and a stable policy environment rather than short-term fluctuations.

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