India’s external balances give RBI confidence amid modest current‑account deficit

New Delhi, September 24 – In remarks to an audience of bankers and economists, RBI Deputy Governor Poona Gupta said that the rupee’s recent 13.1% slide from March 2025 to September 2026 does not signal a long‑term weakness. Instead, she argued that the currency has considerable headroom to move from a flat stance to a stronger one.

According to Gupta, the current‑account deficit is on a downward trajectory, a development she attributes to India’s underlying economic strength and emerging export competitiveness. The rise in merchandise exports, together with robust service‑sector earnings, underpins this shift.

“The RBI is committed to maintaining calm and orderly conditions in the foreign‑exchange market. Our decades‑long experience equips us to offset any net shortfall in the current‑account or balance‑of‑payments,” she told the gathering.

India’s historical pattern of a modest CAD and a large capital‑account surplus has kept the overall BoP in surplus. As the CAD as a share of GDP continues to contract, external stability improves.

Temporary factors – notably sharp increases in oil and gold prices – lifted the CAD in the short run, resulting in a negative BoP of about $5 billion in FY 2024‑25 and $23.6 billion in FY 2025‑26. However, ongoing moves toward alternative energy and domestic oil exploration are expected to cut import‑oil dependence, further reducing the current‑account gap.

Gupta concluded that the combination of stabilising oil prices, the positive impact of recent FTAs, and a favourable exchange‑rate environment will sustain the rupee’s strengthening momentum.