“India runs a trade deficit in goods. Its 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,” it said.
“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. Policy dynamism and purposeful governance reinforce this backdrop. The rupee’s valuation does not accurately reflect India’s stellar economic fundamentals,” the survey said.
In other words, the rupee, therefore, is punching below its weight. 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. However, it does cause investors to pause. Investor reluctance to commit to India warrants examination, it said.
India has its work cut out. It is a country of 145 crore people aspiring to become a richer country within a generation, within a democratic framework. India’s size and democracy preclude the possibility of templates worthy of emulation. With the global dominant power rethinking its economic and other commitments and priorities, throwing global trade into a welter of uncertainty and global frictions mounting and fault lines widening, India’s economic ambitions are confronting powerful global headwinds, the survey said.
Those same forces can be turned into tailwinds if the State, the private sector, and households are willing to align, adapt, and commit to the scale of effort that the moment demands. The task will be neither simple nor comfortable — but it is unavoidable, it said.
Between April 1 and January 22, 2026, the Indian rupee depreciated by approximately 6.5 per cent against the US dollar. However, the movement in the INR has been orderly. Over the medium to long term, exchange rate dynamics are expected to be guided by structural fundamentals, such as productivity gains, export diversification towards higher-value goods and services, a stable policy environment rather than short-term fluctuations, it said.
Over the long run, the exchange rate outcomes are thus a reflection of economic fundamentals, the survey said.
At the same time, in the short term, they are shaped by investor sentiment and capital flow dynamics, leading to phases of both undershooting and overshooting relative to fundamentals. Over time, however, currency performance will be determined by the economy’s ability to generate domestic savings, sustain external balance, attract stable FDI, and build export competitiveness rooted in innovation, productivity and quality, it said.
