In a spot

It's good that RBI hasn't tried to artificially shore up Re's value, but policymakers must read the warning signals

- 

THE RESERVE BANK of India's (RBI) tolerance for a free-falling, undervalued rupee is a fresh and pragmatic approach as the central bank has finally stayed away from attempting to defend any symbolic line in the sand. For far too long, central bankers and successive governments have preferred to leave the currency over-valued even though an artificially strong rupee doesn't really help India's exporters who trade in a competitive global market. An undervalued currency will help exporters discover some new markets and should help improve the trade balances with some countries. With the India-US trade deal not having been signed yet, exports are clearly suffering. So far in FY26, exports have been more or less flat. While a cheaper rupee will no doubt push up imported inflation, the low inflationary environment at home will help cushion the impact of costlier imports. Globally too, inflation has been benign though of late prices of some commodities, like copper, have been rising. Fortunately, prices of crude oil have been stable around the $63-64/barrel level.