India’s Economic Survey 2026 highlights that the rupee’s current valuation does not reflect the country’s strong fundamentals. While an undervalued currency helps offset higher tariffs and poses no inflation threat, the Survey warns that investor hesitation due to rupee weakness warrants closer examination to sustain long-term capital inflows.
India’s Economic Survey 2026, tabled in Parliament on January 29, has spotlighted the Indian rupee’s performance as a key macroeconomic theme. The Survey asserts that the rupee’s valuation does not accurately mirror India’s stellar economic fundamentals, which include robust GDP growth, stable inflation, and strong foreign exchange reserves.
Key highlights from the Survey:
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Undervaluation benefits: The Survey notes that a weaker rupee is not entirely disadvantageous. It helps soften the impact of higher tariffs on exports and does not pose an immediate threat to inflation, given India’s resilient macroeconomic framework.
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Investor sentiment: Despite these positives, the Survey acknowledges that a weaker rupee can cause investors to hesitate, leading to reluctance in committing long-term capital. This dynamic, it argues, requires careful policy examination.
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Global context: The rupee’s underperformance in 2025 was largely attributed to external flows and global uncertainty, rather than domestic weaknesses. Geopolitical tensions and foreign portfolio outflows weighed on the currency, even as India’s fundamentals remained strong.
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Policy outlook: The Survey suggests that while undervaluation may provide short-term cushioning, India must continue to strengthen investor confidence through structural reforms, tariff rationalisation, and transparent communication.
The broader message is clear: India’s economy remains on solid footing, but currency perception matters. Policymakers are urged to balance the tactical advantages of a weaker rupee with the strategic need to attract sustained foreign investment.
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, the rupee’s trajectory and investor sentiment will be closely watched as indicators of India’s global economic positioning.
Sources: Economic Times, News18, CNBC-TV18
