The rupee’s depreciation has sparked intense debate, with concerns over policy missteps, market interventions, and the broader economic impact. To break down the complexities, BasisPoint Insight spoke to G. Mahalingam, a seasoned market regulator with 34 years at the Reserve Bank of India, including as chief dealer of foreign exchange and later as Executive Director overseeing entire market operations. He later served as a whole-time member at SEBI and now sits on the board of LIC and other financial institutions.In this two-part interview, Mahalingam unpacks the real drivers of the rupee’s movement. He argues that the RBI’s recent reluctance to let the rupee adjust naturally may have created pent-up pressure, which is now unwinding. He emphasises the importance of the real effective exchange rate over nominal stability and warns against short-sighted interventions that merely delay inevitable market corrections.
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