New Delhi, March 19 -- A sharp depreciation of the rupee in recent months may have addressed concerns raised by economists and policymakers who argued for allowing the currency to its own level in the markets. At the same time, a weaker rupee does not sit too well politically as governments often prefer a stronger currency. This puts the Reserve Bank of India (RBI) between a rock and a hard place: whether to defend the currency against the dollar or to let it move freely.

India, under the previous RBI governor Shaktikanta Das, witnessed exchange rate stability, which, market watchers believe, changed after the new governor, Sanjay Malhotra, took charge. A Mint analysis of the rupee's movement shows that the rupee depreciated 1.1% in the ...