Rupee Valuation and REER
Economy · Thursday, 30 July 2026
RBI Governor stated that the Indian rupee is undervalued in nominal and REER terms. REER measures the rupee against a basket of 40 currencies adjusted for inflation, with base value 100.
Quick highlights
- Nominal exchange rate reflects spot price.
- REER adjusted for inflation.
- Base value 100 benchmark.
- Below 100 indicates undervaluation.
Context
RBI Governor clarified that rupee is undervalued in nominal and REER terms.
Key Facts
REER is weighted average against 40 trading partner currencies. Above 100 indicates overvaluation; below 100 indicates undervaluation.
Significance
Impacts export competitiveness, import costs, and macroeconomic balance.
Challenges / Way Forward
Maintain stable exchange rate through prudent forex management.
Exam Angle
GS III: Exchange rate management, macroeconomics.
Remember this
- REER base = 100.
- 40 currency basket.
- Below 100 = undervalued.
Background reading
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