Impact of India-US Trade Deal on Indian Rupee
Reserve Bank of India Governor Sanjay Malhotra discussed the potential effects of the India-US trade deal on the Indian Rupee, emphasizing that the impact would depend on the specifics of the agreement.
- The Indian currency appreciated by approximately 1.5 Rupees per dollar following the trade deal announcement.
- From April 1, 2025, to January 15, 2026, the Rupee depreciated by about 5.4% against the US dollar.
Trade Deal and Tariff Changes
- The trade deal, concluded by Prime Minister and US President, reduced tariffs on Indian exports from 50% to 18%.
- Previously, this included a 25% punitive tariff imposed by President Trump.
Rupee Valuation and Economic Fundamentals
The Economic Survey suggests that the Rupee is undervalued, not reflecting India's strong economic fundamentals.
- An undervalued Rupee can help offset higher American tariffs on Indian goods.
- There is currently no threat of higher inflation from increased crude oil prices.
Government's Efforts and Global Influences
- Finance Minister, during the Budget 2026 presentation, stated that the government has stabilized domestic fundamentals.
- She acknowledged that global uncertainty is impacting the Rupee's movement against the US dollar.
- The Rupee's performance is influenced more by external forces rather than domestic weaknesses.
