<h2>Overview</h2> <p><strong>Chairman of the Economic Advisory Council to the Prime Minister (EAC‑PM), S. Mahendra Dev</strong> stated on <strong>8 April 2026</strong> that the <span class="key-term" data-definition="Indian Rupee — India’s official currency; its exchange rate with the U.S. dollar is a key macro‑economic indicator affecting trade, inflation and capital flows (GS3: Economy)">Indian Rupee</span> is likely to stabilise around the <strong>92‑93 per U.S. dollar</strong> band. He linked this outlook to easing <span class="key-term" data-definition="Geopolitical tensions — political or military conflicts between nations that create uncertainty in global markets, influencing capital flows and exchange rates (GS3: Economy)">geopolitical tensions</span> and robust <span class="key-term" data-definition="Macroeconomic fundamentals — aggregate indicators such as GDP growth, inflation, fiscal deficit, and current‑account balance that reflect the overall health of an economy (GS3: Economy)">macroeconomic fundamentals</span>.</p> <h3>Key Developments</h3> <ul> <li>The rupee, pressured by global uncertainties, is projected to find a stable range of <strong>92‑93 INR per USD</strong>.</li> <li>Recent <span class="key-term" data-definition="Foreign Institutional Investors — overseas entities that invest in Indian equity and debt markets; their capital flows significantly affect market liquidity and the exchange rate (GS3: Economy)">FII</span> outflows, triggered by the <span class="key-term" data-definition="Conflict between the United States and Iran — a geopolitical flashpoint that can heighten risk aversion among global investors (GS3: Economy)">U.S.–Iran conflict</span>, are expected to reverse as tensions ease.</li> <li>Improved investor sentiment is likely to boost foreign capital inflows, supporting the rupee and external sector stability.</li> </ul> <h3>Important Facts</h3> <p>1. The current rupee‑dollar rate hovers near the <strong>92‑93</strong> level, a range considered a technical support zone. 2. <span class="key-term" data-definition="Economic Advisory Council to the Prime Minister (EAC‑PM) — a high‑level body that advises the Prime Minister on macro‑economic policy, fiscal reforms and financial stability (GS3: Economy)">EAC‑PM</span> provides policy guidance but does not have executive powers. 3. A stable exchange rate reduces import‑cost volatility, aiding inflation management. 4. Re‑entry of <span class="key-term" data-definition="Foreign Institutional Investors — overseas entities that invest in Indian equity and debt markets; their capital flows significantly affect market liquidity and the exchange rate (GS3: Economy)">FII</span> can improve market depth and lower the cost of capital for Indian firms.</p> <h3>UPSC Relevance</h3> <p>Understanding exchange‑rate dynamics is essential for <strong>GS Paper III (Economy)</strong>. Candidates should be able to discuss how external shocks, investor sentiment, and policy advice from bodies like the <span class="key-term" data-definition="Economic Advisory Council to the Prime Minister (EAC‑PM) — a high‑level body that advises the Prime Minister on macro‑economic policy, fiscal reforms and financial stability (GS3: Economy)">EAC‑PM</span> influence monetary stability. The role of <span class="key-term" data-definition="Foreign Institutional Investors — overseas entities that invest in Indian equity and debt markets; their capital flows significantly affect market liquidity and the exchange rate (GS3: Economy)">FII</span> flows is a recurring theme in questions on capital markets and balance‑of‑payments.</p> <h3>Way Forward</h3> <ul> <li>Maintain prudent fiscal discipline and credible monetary policy to reinforce the rupee’s stability.</li> <li>Enhance transparency in the foreign‑exchange market to attract sustainable <span class="key-term" data-definition="Foreign Institutional Investors — overseas entities that invest in Indian equity and debt markets; their capital flows significantly affect market liquidity and the exchange rate (GS3: Economy)">FII</span> participation.</li> <li>Monitor geopolitical developments closely; swift diplomatic engagement can mitigate market disruptions.</li> <li>Strengthen macro‑economic fundamentals—steady growth, controlled inflation, and a manageable current‑account deficit—to provide a solid anchor for the exchange rate.</li> </ul>