From Panaji’s beaches to Margao’s markets, the Rupee’s swings touch every corner of Goa. When it slid to Rs 87.95 against the Dollar in February 2025, tourists found India cheaper, households with remittances gained, while local businesses struggled with higher fuel and import costs. To steady the currency, the Reserve Bank of India (RBI) tapped its foreign exchange reserves. But as billions are spent, the question looms: how much is too much, and who benefits?
The RBI balances between free markets and intervention. Unlike China’s tightly managed Yuan, India follows a “market-determined exchange rate,” tempered by pragmatism. Left unchecked, sharp falls in the Rupee can hit import-heavy sectors like crude oil, which makes up over a quarter of imports. Dollar sales provide a buffer, but constant use risks depleting reserves and distorting markets.
India’s $650 billion reserves offer firepower, yet global headwinds—U.S. rate hikes, geopolitical tensions—can drain them. Each Dollar sold today is one less for future shocks. Intervention cannot be default; resilience needs reforms to reduce currency vulnerability. The challenge: ensuring stability to retain investor confidence, while allowing flexibility to reflect fundamentals. The RBI must reassure without overplaying its hand.
IMPACT ON GOA
This tension is felt keenly in Goa. The state’s economy, heavily reliant on tourism, remittances, and exports, is particularly sensitive to currency volatility. A weaker Rupee can make Goa a more attractive destination for foreign tourists, boosting hotel occupancy, restaurant revenues, and allied services.
Simultaneously, families receiving remittances from Goans working abroad see higher Rupee returns, giving households additional spending power. Yet the same depreciation raises the cost of fuel, imported goods, and overseas education, squeezing both households and businesses. Exporters of pharmaceuticals, seafood, and iron ore may gain in competitiveness, but volatility complicates contract planning and hedging. For Goa, the RBI’s interventions are therefore not abstract financial manoeuvres; they ripple through tourism, trade, education, and household budgets alike.
There is also a political dimension. A sliding Rupee is more than a financial statistic; it is a symbol of national strength or weakness. Governments are wary of headlines proclaiming “record lows.” The temptation to lean on the RBI for quick fixes grows strong. Yet central banks are not magicians; they can manage volatility, not rewrite fundamentals. A weak Rupee often reflects deeper issues: trade deficits, energy dependence, or capital flight that need structural solutions beyond Mint Street’s remit.
The RBI’s challenge is magnified by India’s dual identity: an emerging-market giant yet a vulnerable economy. On one hand, it attracts massive inflows, drawn by growth and digital boom. On the other, it remains dependent on imported energy and sensitive to global liquidity. This paradox forces the RBI to manage inflow–outflow cycles without exhausting reserves. Intervention becomes not just management but signalling: India will not allow disorderly depreciation, even if gradual shifts are accepted.
Critics argue interventions blur the line between smoothing volatility and targeting rates. By selling Dollars, the RBI risks creating an artificial comfort zone where exporters avoid hedging, carry trades thrive, and the bank is burdened with defending the indefensible. A healthier approach is to prepare stakeholders for flexibility, while preventing extreme moves.
The deeper solution is strengthening fundamentals: diversifying energy, boosting exports, attracting stable capital, deepening financial markets, and fiscal prudence. Deficits financed by short-term inflows leave the currency exposed. RBI interventions are like painkillers—temporary relief, not structural therapy.
For credibility, the Rupee must inspire confidence at home through stability and predictable policy. Too much intervention undermines, too little risks volatility. The RBI’s role is calibrated restraint: ensuring gradual adjustments without panic. Ultimately, stability rests less on Dollar sales than India’s fundamentals.
