RBI's Gupta calls the rupee's 13% fall since March 2025 an overcorrection

Victoria Shinder03 October 2026, 13:072 min read

Reserve Bank of India Deputy Governor Poonam Gupta has argued that the rupee's slide over the past year and a half is not justified by India's fundamentals. The speech was delivered on 23 September at the State Bank of India's banking and economics conclave in Mumbai and published by the Bank for International Settlements on 30 September.

The numbers she cited. India usually runs a small current account deficit, kept below 1% of GDP by services exports and remittances, and a larger capital account surplus. Recent oil and gold price shocks have pushed the current account deficit up temporarily, and for two years capital inflows have fallen short of it, leaving the overall balance of payments in deficit by about $5.0bn in 2024-25 and $23.6bn in 2025-26. Over the same period, she said, the rupee depreciated by 13.0% point to point from 31 March 2025 to 17 September 2026. Growth was 7.8% in 2025-26 and is estimated at 7.8% in the first quarter of 2026-27. Citing the IMF, she said India's gross public debt should fall from 83.4% of GDP in 2026 to 77.7% in 2031.

Her reading. Gupta said the current account deficit should narrow further as merchandise exports gain from new free trade agreements and oil dependence declines, and that the capital account should turn more favourable, plausibly from later this financial year. She listed reasons including stretched valuations elsewhere, AI enthusiasm in other markets reaching saturation, strong domestic fundamentals and, eventually, inclusion of Indian bonds in more global indices. She said the special capital-flow measures introduced in June had produced a meaningful balance-of-payments surplus for this year.

On that basis she described the rupee's cumulative depreciation as possibly an "overcorrection" and a temporary phenomenon. With the RBI committed to orderly conditions in the foreign exchange market and, in her words, holding enough resources to meet decades' worth of deficits, she said current market dynamics do not appear well-founded, and that there is a fair case for the rupee to stabilise or even appreciate.

She contrasted India's bond market, which she said has performed well, with equities, which have lagged as investors chase AI-linked stories in other economies.

What it means

This is a central bank official's assessment, not a policy decision, and it is the RBI's job to argue for orderly markets. What the speech does give is the official numbers behind that view — the size of the payments deficit and of the depreciation — and a clear signal that the RBI regards current levels as out of line with fundamentals. Whether markets agree is a separate question the speech cannot settle.