IMF reclassifies India's FX regime as 'crawl-like', Pg15

Key Highlights:

• The IMF reclassified India's exchange rate regime as "crawl-like arrangement" after previously terming it "stabilized."
• This reclassification follows an IMF review conducted earlier in 2025.
• The Indian Rupee has depreciated by approximately 4% this year and hit a record low of 89.49 against the US dollar on November 21.
• The IMF projects India's economic growth at 6.6% in 2025-26 and 6.2% in the subsequent fiscal year.

Detailed Insights:

• A crawl-like arrangement is defined by the IMF as an exchange rate that stays within a 2% margin relative to a statistically identified trend for at least six months, excluding specific outliers.
• The IMF had classified India's exchange rate regime as "stabilized" between December 2022 and November 2024, before this recent change.
• Increased exchange rate flexibility can help India absorb external shocks, reduce the need for reserve accumulation, and promote market development, according to the IMF.
• The depreciation of the Rupee was partly influenced by steep US trade tariffs, which negatively impacted trade and inward portfolio flows.

Increasing Exchange Rate Flexibility.png

Key Concepts Involved:

• Exchange Rate Regime: A system that governs how a country manages its currency value in relation to other currencies.
• Crawl-like Arrangement: An exchange rate regime where the currency is allowed to fluctuate within a narrow band, adjusted periodically.
• Stabilized Regime: An exchange rate regime where the monetary authority intervenes to prevent excessive fluctuations in the exchange rate.