Finance Minister Nirmala Sitharaman has said the Reserve Bank of India (RBI) will continue taking measures to prevent excessive volatility in the rupee, which has depreciated significantly against the US dollar over the past 18 months.
Speaking at the Bloomberg New Economy Forum 2026 on Tuesday, Sitharaman attributed the currency's weakness largely to global uncertainties, including fluctuations in the dollar. She said India's macroeconomic fundamentals and foreign exchange reserves remained sound.
The minister clarified that the RBI's objective was to limit sharp currency fluctuations rather than fix the rupee at a particular exchange rate.
The RBI recently announced measures to ease pressure on the rupee amid sustained dollar demand.
These include a special window for oil marketing companies designed to shift their dollar demand away from the spot foreign exchange market. The central bank also tightened rules governing foreign exchange derivatives trading to curb speculative positions against the rupee.
Sitharaman said the measures supported the currency, which appreciated by around 1% on Monday. It subsequently traded at ₹94.96 against the US dollar in early trading on Tuesday, according to the figures cited by the minister.
She said the government would continue to maintain fiscal discipline and strengthen domestic economic fundamentals while responding to external pressures on the currency.
Sitharaman also addressed calls to rationalise the Securities Transaction Tax (STT) and long-term capital gains (LTCG) tax in the securities market.
She described the debate as healthy and said she would listen carefully to the arguments. However, she declined to indicate whether the government would consider changes in the upcoming Union Budget.
Budget preparations for 2027–28 have begun, she said, adding that it would not be appropriate to disclose potential decisions at this stage.
The Union Budget 2027–28 is expected to be presented on February 1, 2027.
The debate over STT and LTCG taxation has drawn attention from investors and market participants, including during the minister's discussions with investors in India and overseas.
The government and the RBI have also introduced measures to attract foreign capital and support the rupee amid the West Asia crisis.
The government expanded the list of government securities eligible under the Fully Accessible Route (FAR), allowing foreign investors greater access to specified government debt instruments. It also announced income-tax exemptions on interest and capital gains earned by foreign portfolio investors from investments in government securities, as described in the source.
Separately, the RBI allowed banks to access a swap facility for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits with maturities of three to five years. The facility enables banks to swap US dollar deposits with the RBI and manage currency risks.
Banks mobilised $133 billion under the FCNR(B) deposit scheme by August 31, the closing date brought forward by a month following a strong response from the Indian diaspora.
Sitharaman said domestic private investment was flowing into India alongside investment from overseas.
She identified renewable energy, semiconductors and chip design, biosimilars, pharmaceuticals, generic drug manufacturing and aircraft maintenance, repair and overhaul (MRO) facilities among the sectors attracting private capital.
Investment is coming from companies expanding their existing businesses as well as firms entering new areas, she said.
The government's challenge is to sustain investor confidence and domestic investment while managing external pressures, including currency volatility and geopolitical uncertainty.