IMF reclassifies India's Exchange Rate Arrangement regime as 'crawl-like' from 'stabilised'

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The IMF on Wednesday reclassified India's exchange rate regime as a "crawl-like arrangement" from "stabilised".

For this classification IMF cited following reasons:

" The exchange rate of the rupee is determined in the interbank market, where the Reserve Bank of India (RBI) intervenes frequently. The RBI’s stated intervention objective is to curb excessive volatility. India’s de jure exchange rate arrangement is floating, and its de facto exchange rate arrangement is classified as a crawl-like arrangement ".

For classification as a crawl-like arrangement, the exchange rate must remain within a narrow margin of 2% relative to a statistically identified trend for six months or more (with the exception of a specified number of outliers), and the exchange rate arrangement cannot be considered as floating. Normally, a minimum rate of change greater than allowed under a stabilized (peg-like) arrangement is required. However, an arrangement will be considered crawl-like with an annualized rate of change of at least 1%, provided that the exchange rate appreciates or depreciates in a sufficiently monotonic and continuous manner. 

Classification as a stabilized arrangement entails a spot market exchange rate that remains within a margin of 2% for six months or more (with the exception of a specified number of outliers or step adjustments), and is not floating. The required margin of stability can be met either with respect to a single currency or a basket of currencies, where the anchor currency or the basket is ascertained or confirmed using statistical techniques. Classification as a stabilized arrangement requires that the statistical criteria are met, and that the exchange rate remains stable as a result of official action (including structural market rigidities). The classification does not imply a policy commitment on the part of the country authorities.

  1. Reuters 
  2. Revised System for the Classification ofExchange Rate Arrangements by IMF
  3. <<< IMF reclassifies India’s de facto exchange rate regime from “floating” to “stabilized arrangement” for period December 2022 to October 2023


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