With the exchange rate at ₹95.31 against 1 USD , the rupee's value continues to be shaped by global markets, inflation and trade competitiveness.
NEW DELHI: Every time the rupee slides past a new milestone against the dollar, the same ritual plays out. Television anchors reach for words like “plunge” and “humiliation.” Opposition leaders dust off old quotes from whichever party is now in power. And somewhere in the noise, the actual economics of what a currency is meant to do gets lost entirely. This is worth untangling properly, because two opposite errors are both doing damage here. One says the rupee’s level is a mark of national strength. The other, often offered as the sober correction, says the exchange rate is simply a number and therefore doesn’t matter much at all. Neither holds up.
Where the National Honour Story Comes From
To see how deep this runs, it helps to trace its political history. In 2013, as the rupee slid past ₹60 to the dollar during the global taper tantrum, PM Narendra Modi, then the BJP’s prime ministerial candidate, told a crowd that the currency was “lying in the ICU.” Sushma Swaraj, then Leader of the Opposition, said the Prime Minister’s grace had fallen along with it. A decade later, once the roles had reversed, Congress spokesperson Supriya Shrinate held up a magnifying glass at a press conference to mock how far the rupee had fallen under the very government that had once used the same rhetoric against its predecessor. The irony writes itself. Both sides have taken turns treating a market price as a referendum on governance, regardless of which party happened to be holding power when the number moved.
This instinct isn’t just rhetorical either. It runs all the way into design choices. When India adopted its distinctive ₹ symbol in 2010, then Finance Minister Pranab Mukherjee explicitly said the goal was to help the rupee “join the select club” of currencies with global stature, alongside the dollar, the pound and the yen. The two horizontal stripes across the symbol were officially meant to evoke the national flag. In other words, the currency’s very shape was designed to carry the weight of sovereign pride, which only entrenched the idea that its value should too.
Why the Level Itself Isn’t the Right Measure
Here is where the story gets more interesting than either side of the political shouting match suggests. Economists have a specific tool for judging whether a currency is actually healthy, called the Real Effective Exchange Rate or REER. Rather than tracking the rupee against the dollar alone, REER weighs it against a basket of India’s trading partners and adjusts for inflation differences between them. And what this measure reveals cuts directly against the popular narrative. Between 2014 and 2024, the rupee fell nominally by about 27.6% against the dollar, a decline that dominated headlines as national decline. Yet over that same decade, its REER mostly stayed at or above its baseline, meaning the rupee had actually grown more expensive in real terms relative to India’s trading partners. That sounds backwards until you realize what it means practically. Indian exporters were quietly losing competitiveness even as commentators mourned a “weak” rupee, because the number everyone was watching wasn’t the number that actually determines whether Indian goods can compete abroad.
Former RBI Governor Raghuram Rajan has made a version of this point directly, noting that when the dollar strengthens against nearly every major currency at once, framing India’s slide as a uniquely domestic failure misses the global picture entirely. Former Chief Economic Advisor Arvind Subramanian has gone further, calling the belief that a strong rupee equals a strong India a genuine policy mistake, since an overvalued currency floods domestic markets with cheap imports and squeezes exactly the labour-intensive industries, textiles, leather, footwear, that India most needs to keep growing.
Why “It’s Just not a Number”
So should the rupee’s movements simply be shrugged off as economic noise then? Not quite and this is where the dismissive framing runs into its own trouble. What genuinely matters isn’t the nominal level but how the currency gets there. A rupee that adjusts gradually and predictably serves the economy well. One that gets artificially propped up until it breaks does real damage. The 2013 episode is the clearest illustration of this. As capital fled emerging markets that year, the RBI spent billions defending a nominal level rather than letting the rupee adjust and the defense failed anyway, with the currency eventually crashing 20% regardless while reserves fell to barely six months of import cover. Compare that with how Governor Sanjay Malhotra handled the far larger 2026 shock, when the Strait of Hormuz crisis pushed Brent crude above $111 a barrel and drained tens of billions from India’s import bill. Rather than fighting to hold a specific level, Malhotra explicitly framed the RBI’s interventions as smoothing excessive volatility, not defending any particular price, while deploying tools like net open position limits and hedging support for foreign deposits to manage the transition in an orderly way. The rupee still weakened considerably. But it did so without the reserve-burning panic of a decade earlier and crucially, without triggering the kind of disorderly collapse that has repeatedly battered economies like Pakistan, where successive governments defended an artificial peg until it shattered or Turkey, where politically driven currency management has produced chronic, destabilising volatility.
There’s also a real cost hiding in this obsession with levels that rarely gets discussed. Every time the central bank intervenes to prop up the rupee beyond what market forces suggest, it has to absorb the resulting rupee liquidity through costly sterilization operations, essentially borrowing at higher domestic rates to hold lower-yielding foreign assets. Estimates from earlier intervention-heavy periods put this cost as high as 4.75% of GDP in a single year. That is a genuinely enormous price to pay for the emotional comfort of a stronger-looking number on the evening news.
A Better Way to Think About It
The honest position sits between the two extremes India’s public discourse keeps offering. The rupee’s exchange rate is neither a scoreboard of national pride nor an irrelevant abstraction that deserves no attention at all. What actually matters is stability and real competitiveness, meaning how predictably the currency moves and whether its value, adjusted for inflation against India’s trading partners, keeps domestic exporters genuinely competitive. Singapore has built its entire monetary policy around exactly this insight, managing its currency against a trade-weighted basket rather than fixating on any single bilateral rate and it has produced one of the most stable, trusted currencies in the world as a result. India’s own reserve position, now among the largest globally, offers real strength precisely because it provides a buffer against shocks rather than ammunition for defending a headline number. The next time the rupee crosses some new milestone and the debate resumes right on cue, the more useful question isn’t whether the rupee has fallen. It’s whether it got there in an orderly way and whether Indian exporters can still sell competitively once it does.
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