Duvvuri Subbarao cautions that India’s short-term measures to stabilise the rupee overlook underlying structural weaknesses, risking long-term economic stability amid significant foreign investor exodus.
Duvvuri Subbarao has warned that India’s effort to steady the rupee with short-term capital measures is unlikely to solve a deeper problem: foreign investors are turning away from the market. The former Reserve Bank of India governor said the pressure on the currency reflects structural weaknesses rather than a temporary confidence gap, making emergency steps an expensive and limited answer.
According to Business Standard, the Reserve Bank’s latest attempt to draw in foreign currency through incentives for non-resident Indians has already attracted $36.72 billion through July 31 and could cross $50 billion before the scheme closes on September 30. Subbarao argued that such deposits amount to borrowed money that must eventually be repaid, and said they do not deliver the kind of lasting confidence the economy needs. Instead, he pointed to measures that lower transaction and compliance costs for overseas investors and make it easier to access Indian equity and debt markets.
The warning comes as foreign investors have pulled a net $17.3 billion from Indian stocks and bonds so far in 2026, while Indian equities still trade at a sizeable premium to the broader Asian market, a gap that may be pushing money elsewhere. Subbarao also said stronger domestic demand would help lure investment back. His comments echo earlier remarks reported by the Economic Times, the Indian Express and Business Standard, in which he urged the RBI to let the rupee weaken gradually and rely on liquidity tools rather than rate increases to contain inflation. He noted that the current environment is less favourable than in 2013, when similar action was more effective because global liquidity was abundant.
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