The Reserve Bank of India is watching the world drift toward a currency war—and mostly staying out of it. As the United States and China escalate tariff hostilities, Governor Sanjay Malhotra has made it clear that the RBI will not chase every ripple in the rupee. India, he suggests, has earned the luxury of staying calm.It’s not bravado. India’s external vulnerability is far lower than that of many emerging markets due to its low trade interconnectedness, Malhotra reckons. Exports account for just 12% of GDP, and shipments to the US barely cross 2%. The current account deficit for the first nine months of the fiscal year came in at 1.3% of GDP, and with foreign exchange reserves at $676.3 billion, the RBI has ample firepower but little reason to deploy it. The central bank is intervening only to smooth “excessive” volatility—not to protect any level.
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