Economy · 31 Jul 2026
With reference to India's exchange rate framework, which one of the following statements is correct?
Tests precise conceptual distinction between REER and nominal exchange rate alongside India's stated non-targeting policy stance, rather than simple current-affairs recall.
Subscribe / Login in App →RBI Governor Sanjay Malhotra called the rupee "undervalued" in both nominal and REER terms even as it depreciated 5.8% year-to-date in 2026, while maintaining the RBI targets no fixed exchange rate.
This tests precise conceptual understanding of REER versus nominal exchange rate and India's stated managed float policy, a recurring GS3 monetary economics theme.
REER measures the rupee against a currency basket adjusted for inflation; the RBI follows a managed float with no fixed target rate and India's import cover stands at roughly 11 months.
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