The Reserve Bank of India’s recent approach to stabilizing the rupee against the US dollar has drawn both praise and concerns. Despite the rupee’s historically low volatility, experts question if increased RBI interventions to maintain stability might distort market dynamics.

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• RBI intervention in rupee-dollar stability is at an all-time high since 1991.
• Rupee’s volatility fell from 5% to 1.9% (April 2023-August 2024).
• The euro-dollar rate stability relies on market forces, not frequent intervention.
• Since 2022, RBI actively manages both sides of the market, curbing rupee’s natural fluctuations.
• Critics argue fixed rupee rates contradict free market principles.
• Pegged rates distort economic signals crucial for demand-supply adjustments.
• Previous fixed rates led to India’s 1991 financial crisis due to foreign exchange shortages.
• Current fixed policy may harm “Make in India” due to rising export costs.
• Lack of RBI transparency leaves market players uncertain on intervention timing and scope.
• Experts warn prolonged rate control could hinder India’s growth as a high-income economy.