In a recent statement, Chief Economic Advisor (CEA) Anantha Nageswaran shared a positive outlook on India’s economy, addressing concerns about the rupee, bond yields, and inflation.1
Thank you for reading this post, don't forget to subscribe!Rupee’s Position: A Limited Slide is Not a Worry
Nageswaran dismissed worries about the rupee’s recent slide, which saw it touch a fresh low of 88.47 against the dollar. He pointed to India’s ample foreign exchange reserves and low external debt, which he says make the currency resilient. The CEA explained that the current weakness is likely due to high dollar demand and lower investment inflows. In his view, a limited slide can even help make Indian exports more competitive, and it would only become a concern if the depreciation were “excessive.”2
Bond Yields: An Opportunity for Investors
The CEA believes that India’s 10-year bond yield, currently at 6.4–6.5%, has room to fall further. While he acknowledged that concerns about borrowing supply and the fiscal deficit are affecting the market, he expressed confidence in the government’s ability to maintain its deficit target.3 Nageswaran stated that the second-half borrowing program will remain unchanged, making Indian bonds a “good opportunity for investors” at current yield levels.
Inflation Outlook: Benign Through 2026
Looking ahead, Nageswaran projected that inflation will remain “fairly benign” through the end of next year, and potentially into 2026, assuming a normal monsoon season. This long-term forecast suggests confidence in the underlying economic conditions and the government’s ability to manage price stability.
