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The rupee's Real Effective Exchange Rate (REER) fell from 108.03 in November 2024 (8% overvalued) to 91.26 by June 2026 (8.7% undervalued).
By the Real Broad Effective Exchange Rate (RBEER) measure, the rupee (90.15) is now more undervalued than the Chinese yuan (92.24) as of June 2026.
RBI Governor Sanjay Malhotra noted the rupee has become undervalued and could appreciate once the West Asia situation stabilises.
A more undervalued currency can theoretically boost export price competitiveness and domestic manufacturing versus imports.
NEER (Nominal Effective Exchange Rate) tracks the rupee's value against a basket of 40 currencies (covering ~88% of India's trade) without adjusting for inflation. REER adjusts NEER for inflation differentials between India and its trading partners, making it the truer measure of currency competitiveness — a REER above 100 signals overvaluation, below 100 signals undervaluation, with 2015-16 as the base year.
Simple Analogy: NEER is like comparing raw prices in different currencies; REER is like comparing prices after adjusting for how much each country's cost of living has changed — the fairer comparison.
| Index | Compiled By | Trade Partners | Base Year |
|---|---|---|---|
| REER | RBI | 40 currencies (~88% of trade) | 2015-16 |
| RBEER | Federal Reserve Bank of St. Louis | 64 trade partners | 2020 |
GS Paper III > Indian Economy, External Sector
Economic & Banking Awareness > Exchange Rates
Real Effective Exchange Rate — NEER adjusted for inflation differentials with trading partners
Real Broad Effective Exchange Rate, an independent measure compiled by the Federal Reserve Bank of St. Louis