‘Punching below its weight’: What Economic Survey 2025-26 said on weak rupee

The Indian rupee “underperformed in 2025” and has emerged as “a victim of geopolitics and a strategic power gap”, even as India’s underlying economic fundamentals remain strong, according to the Economic Survey tabled in Lok Sabha on Thursday.

In the preface to the Survey, Chief Economic Adviser V Anantha Nageswaran noted that India continues to run “a trade deficit in goods” and that the country’s “net trade surplus in services and remittances is not enough to offset it”.

“India depends on foreign capital flows to maintain a healthy balance of payments. When they run drier, rupee stability becomes a casualty,” the Survey said.

Highlighting the macroeconomic environment, the Survey said the overall growth outlook remains favourable, with multiple indicators pointing to economic resilience.

“Growth is good; the outlook remains favourable; inflation is contained; rainfall and agricultural prospects are supportive; external liabilities are low; banks are healthy; liquidity conditions are comfortable; credit growth is respectable; corporate balance sheets are strong; and the overall flow of funds to the commercial sector is robust,” it said.

It added that “policy dynamism and purposeful governance reinforce this backdrop”.

Despite these positives, the Survey said the rupee’s market valuation fails to mirror the strength of India’s economy.

The rupee hit an all-time low of 92.00 against the US dollar in early trade on Thursday, weighed down by steady dollar demand and a cautious global mood.

“The rupee’s valuation does not accurately reflect India’s stellar economic fundamentals. In other words, the rupee, therefore, is punching below its weight,” the Survey said.

It acknowledged that a weaker currency has offered some near-term advantages amid global trade tensions.

“Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now,” it said.

However, it cautioned that the currency’s weakness could weigh on investor sentiment.

“It does cause investors to pause. Investor reluctance to commit to India warrants examination,” the Survey said.