Sixteenth Finance Commission Chairman Arvind Panagariya on Thursday (May 21, 2026) said the Reserve Bank of India (RBI) should not let the “psychology of Rs 100 per dollar” prevent the exchange rate from falling beyond that limit. Mr Panagariya said the social media platform 2026), traders say the RBI intervened to stop it from crossing that limit. Mr Panagariya argued that, in case the oil shortage is short-lived, the rupee will still depreciate but will “recover substantially” once the oil import bill comes down and foreign capital looks for Indian investments to take advantage of the cheap rupee.

If the oil shortage lasts more than a year, he said “resorting to anything other than depreciation would be a loss-making proposition”, adding that efforts to protect the rupee “will continue to be spent until the reserves are exhausted”. “Neither dollar-denominated bonds or high-interest dollar-denominated NRI deposits will prove to be more than a band-aid,” Mr Panagariya said, possibly referring to news reports that the RBI was considering these options to protect the rupee.

“After all, you have to overcome the psychological barrier of 100 rupees per dollar. ” He said dollar-denominated bonds and high-interest NRI dollar deposits are “expensive instruments that pay significantly higher interest than the rate India earns on its foreign exchange reserves”. “This is largely a transfer to wealthy NRIs,” Mr Panagariya said.

“This is not 2013: inflation was in double digits in 2013. Thanks to your [RBI’s] prudent monetary management, that is not the case now.

So, the economy is well placed to absorb some of the inflationary pressure that will accompany depreciation,” he said.