“I think at the moment, the rupee is tracking along an adverse scenario, as are oil prices. And I don’t really think that the adjustment is over,” he said. “We could be looking at the rupee at 95 or even weaker if the pressures persist and the conflict in the Middle East drags on.”
Nim flagged that elevated crude prices remain the central risk, especially as India’s crude basket is currently more expensive than Brent, amplifying pressure on the currency. He added that the outlook remains uncertain given “the headlines coming from the scenario are, of course, very murky,” making it difficult to gauge a clear turning point.
On policy response, Nim indicated that the Reserve Bank of India (RBI) is taking a calibrated approach, allowing the exchange rate to act as a natural shock absorber rather than aggressively defending any specific level.
Watch the full conversation here
“From a macro policy perspective in events like this, where the scale of the oil price shock is so large, the exchange rate has to play its part as a shock absorber,” he said. He added that the central bank is “choosing to intervene when necessary, to smooth out the volatility, instead of defending any particular level aggressively.”
At the same time, constraints on intervention are also emerging. Nim stated that recent market moves, including declines in gold prices, have led to valuation pressures on foreign exchange reserves. “Some estimates suggest it could be close to about $100 billion,” he said, pointing to limits on the RBI’s ability and willingness to defend the currency.
Also Watch: Gold near $4,120 support; silver attractive on dips: Jonathan Barratt
Beyond currency markets, the oil shock is beginning to spill over into broader macro conditions. Nim warned that fiscal pressures could intensify, especially if elevated crude prices persist. “The fiscal stress could continue, and yields could continue to head higher,” he said, adding that risks of fiscal slippage would rise if the shock endures.
Growth is also at risk. Nim said ANZ had already adjusted its projections based on oil assumptions. “We had deducted about 30 basis points from our growth forecast to bring it down to 6.7%,” he noted, while cautioning that the situation is evolving along a more adverse path.
Inflation pressures are simultaneously building beneath the surface. While pump prices have not fully reflected the surge, Nim pointed out that input costs are rising sharply. “Producers are more or less absorbing those costs into their profit margins. But that cannot be a strategy ad infinitum,” he said, warning that broader price pressures could eventually feed into the economy.
Catch all the latest updates from the stock market here
