IMF’s New Rupee Classification Comes as India Faces Tariff Pressures (Source: X/ @AmitArc7)``
The International Monetary Fund (IMF) has updated the way it classifies India’s exchange-rate system after noticing that the rupee has started moving more freely in recent months. The organization said that India is now in a strong position to let its currency fluctuate with greater flexibility.
The phrase "IMF crawl budget system" is not an official IMF term. It appears to confuse two unrelated concepts: the "crawl budget" commonly used in SEO and web development, and the IMF's description of certain countries' currency systems as "crawl-like arrangements" or "crawling pegs." These IMF terms refer to exchange-rate systems where a country makes small, gradual currency adjustments.
Recently, the IMF placed the Indian exchange-rate system under a "crawl-like arrangement." The change indicates that the RBI is permitting the rupee to gradually weaken but still regularly intervenes to stop any sudden, sharp movement in the market.
A crawling peg typically includes minor, steady changes in the currency to reflect inflation differences between one country and its trading partners. The IMF had last updated India's classification in 2023, when the rupee stayed within a very narrow trading range.
Since Sanjay Malhotra took over as RBI Governor in December last year, the rupee is allowed to move more freely, and volatility has increased. This contrasts with the last year under Shaktikanta Das, during which time India's large reserves - now close to $700 billion - were tapped to keep rupee fluctuations closely controlled.
The IMF said in its Article IV report: "While interventions have generally declined in recent months and the rupee/dollar exchange rate has exhibited increased two-way movements, the Reserve Bank of India has continued to use Foreign Exchange intervention regularly.
The Fund said that giving the currency more flexibility would help India absorb external shocks and reduce the need to build reserves at high cost.
The IMF's November 2025 review comes as the rupee faces fresh pressure, falling to a record low before the RBI intervened on November 24 to stabilize it. The currency has weakened about 4% against the US dollar this year. The sharpest drop among major Asian currencies partly due to high US tariffs on Indian exports. RBI Governor Sanjay Malhotra said the rupee’s decline is consistent with India’s inflation gap, noting that a 3%–3.5% yearly fall is normal, while the RBI focuses on curbing “excessive volatility.”
Indian officials have already challenged the IMF's 2023 exchange-rate assessment, and Deputy Governor Poonam Gupta offered fresh criticism of its framework last month, given that sharp currency swings can harm emerging markets.
IMF retained the 6.6% growth forecast for FY 2025–26, assuming prolonged 50% US tariffs, and said the overall economic impact would stay manageable. Coming data on November 28 may show 7.3% GDP growth for July–September 2025.
In its report, the IMF maintained its forecast of India's growth at 6.6% for the fiscal year ending in March, assuming that "prolonged 50% US tariffs" remain in place. As the IMF explains, "Though India's export sector will be impacted by the increase in US tariffs, the overall macro-economic effect is expected to be manageable."
New data due Friday could indicate that India's GDP grew by 7.3% in the July-to-September quarter, according to a Bloomberg survey of economists.
CAD accounted for 3.69% of GDP and WPI inflation recorded about 14%. By that time, the international community was going to declare the Indian economy as a defaulter. To address the issue, the Government of India decided to devalue the Indian currency against the exchange rate.
The IMF has projected the Indian economy to grow at 6.6% in the 2025-26 fiscal year-a revision factoring in a strong first quarter and one expected to outpace China. However, the IMF cut its forecast for the following year to 6.2%, citing potential slowdowns from the initial high momentum. Overall, the IMF sees India as a leading large economy but warns of external risks like trade tensions and protectionism impacting global growth.
India was ranked the world's fifth-largest economy in the year 2025, according to nominal GDP, and was expected to grow at 6.6% year-over-year. India ranked eighth in voting power at the IMF and is expected to surpass Germany to become the world's third-biggest economy by 2028.
The International Monetary Fund is governed by its member countries, with the highest authority resting in the Board of Governors, comprising one governor from each member country. The day-to-day operations are conducted by the Executive Board, which consists of 25 Executive Directors elected by or representing member countries, groups of countries, or the institution itself. Voting power is determined by a country's quota, a contribution based on economic size that reflects the relative size of its economy, offering major economies greater influence.
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