IMF recommends exchange rate flexibility for India

The International Monetary Fund (IMF) has advised that exchange rate flexibility should serve as the primary defense for the Indian economy against energy shocks. IMF Communications Director Julie Kozack stated that allowing the rupee to move freely helps the economy adjust to such shocks.

While the IMF noted that foreign exchange intervention can be appropriate during disorderly market conditions, it emphasized flexibility as the preferred response. However, Kozack added that if rupee depreciation begins to drive broad-based inflation, monetary policy tightening should be considered to maintain price stability.