The rupee has cumulatively depreciated 13.1 per cent on a point-to-point basis between March 31, 2025, and September 16, 2026. However, Reserve Bank of India (RBI) Deputy Governor Poonam Gupta said the Indian currency has a fair chance of stabilising and even appreciating from current levels.

“If anything, there seems to be a fair case for the rupee to not just stabilise but perhaps even appreciate from the current levels, as was being anticipated by the market analysts when the capital flow measures were first announced,” she said.

Gupta expects India’s current account deficit (CAD) to narrow further in the coming years as traditional strengths continue to support the economy and new strengths emerge, particularly the growing success in merchandise exports.

“With the RBI remaining committed to ensuring orderly conditions in the foreign exchange market and having the wherewithal to meet decades worth of CAD, or the net balance of payment (BOP) deficit, the current market dynamics do not appear especially well-founded,” Gupta said at the SBI conclave in Mumbai.

India has traditionally recorded a small current account deficit and a larger capital account surplus, which has helped the country maintain a net positive balance of payments.

The country’s CAD-to-GDP ratio has also declined over time, strengthening the resilience of its balance of payments.

“Furthermore, the CAD levels have remained far below the levels generally considered to be prudent for emerging market economies. Net services exports and remittances remain its great structural strengths. Together, they are large and resilient enough to absorb the merchandise trade deficit and keep the CAD contained at below 1 percent of GDP,” Gupta said.

Recent shocks to oil and gold prices have temporarily increased the CAD. At the same time, India’s capital account surplus has fallen short of the CAD over the past two years. This gap resulted in a negative BOP of about $5.0 billion in 2024-25 and $23.6 billion in 2025-26.

Gupta also said India will reduce its dependence on imported oil by developing alternative energy sources and pursuing domestic oil exploration. She expects both developments to reinforce the long-term decline in oil demand as a share of GDP.

“This would be in addition to oil prices themselves stabilising as soon as the conflict resolves. Meanwhile, the rest of the trade basket is responding well to the new trade opportunities that are being leveraged, a strength that will continue with the positive impact of recent FTAs materialising, and a conducive exchange rate,” she said.