The Indian rupee has been one of the worst-performing emerging market currencies this year. It is weighed down by the Middle East conflict, capital outflows, and a strong US dollar.
Prime Minister Narendra Modi urged citizens to adopt austerity measures. He recommended working from home and using public transport to reduce fuel consumption.
The rupee hit a record low of 96.305 against the dollar on Friday, then recovered to 95.700. It is down 6.5% year-to-date. Without RBI intervention, analysts say it would have fallen further.
Capital Economics argues that allowing the rupee to weaken further would have limited macro fallout. According to Shilan Shah, a 10% fall in the rupee lifts headline inflation by about 0.5 percentage points over three to four quarters.
India's low foreign currency debt shields it from default risks. A weaker rupee also boosts exports.
