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The rupee and the balance of payments

Every rupee that leaves the country comes back as something. What is the account that records it, and what actually moves the exchange rate?

Chapters

Beginner

  1. What an exchange rate isThe price of one money in another, which means it has two sides and no natural direction. A "weak" rupee is good for an exporter and bad for anyone buying oil, and the headline number cannot tell you which matters more.

Intermediate

  1. The balance of payments identityIt is called a balance because it balances by construction. Every rupee that leaves the country comes back as something, and the thing it comes back as is the whole of the information.
  2. The current accountIndia runs a huge goods deficit and almost everybody blames it for the current account deficit. Over April to August 2026 services and remittances more than covered it — and the deficit came from somewhere else entirely.

Advanced

  1. The capital accountWhat is paying for the deficit, and how quickly it could leave. In August 2026 India took in US$50.6 billion of capital in a single month — and the composition of it is a more interesting story than the total.
  2. What moves the rupeeFlows, rate differences, oil and the dollar — and a central bank that can lean against a move but cannot choose the level. India runs a managed float, which is a harder thing to do than either of the alternatives.
  3. A currency defence, read from the documentsOver four days in October 2026 the Reserve Bank raised rates, cut speculative position limits by 95%, imposed a 20% cash reserve on currency derivatives and took the oil companies out of the market. It never said why.