Washington, October 31, 2026 (Yes Punjab News)
The International Monetary Fund (IMF) has said exchange rate flexibility should remain India’s primary response to the energy shock arising from the war in the Middle East, arguing that the rupee should act as the country’s “first line of defence” rather than relying heavily on central bank intervention.
Responding to a question about the Reserve Bank of India’s recent steps to support the currency, IMF Communications Director Julie Kozack said the Fund favoured allowing the rupee to move in response to external pressures so that the economy could adjust.
“Given the ongoing energy shocks that India is confronting, like all countries, our view is that the rupee should be the first line of defence in the face of these shocks,” Kozack said, echoing the position of IMF Asia and Pacific Department Director Krishna Srinivasan.
She clarified that the Fund did not rule out foreign exchange intervention. Such action could be appropriate if market conditions became disorderly, consistent with the IMF’s Integrated Policy Framework.
Kozack added that if significant rupee depreciation triggered broad-based inflation, monetary policy tightening could be considered to preserve price stability.
Despite the external pressures, the IMF has retained its growth forecast of 7 per cent for India in both 2026-27 and 2027-28. Kozack attributed the outlook to robust domestic demand and strong services activity, describing India as an important engine of global growth.
She identified adverse weather, including a possible El Niño, as a key downside risk. Lower crop yields could affect rural economic activity, push up food prices and weaken household purchasing power. However, she said these risks had not materialised so far.
The IMF will reassess its India projections in the January update of its World Economic Outlook.
Kozack also said financial conditions for emerging economies remained broadly supportive, with borrowing spreads still compressed. On the United States, she said the Federal Reserve was appropriately following a data-dependent approach, while headline inflation remained above its 2 per cent target, partly reflecting higher energy prices.
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