CURRENT AFFAIRS | MAY 18, 2026
On Friday, 15 May 2026, the Indian rupee breached ₹95.9 against the US dollar — its weakest ever — putting the psychological ₹100/USD level firmly in sight. Markets, the RBI and treasury desks have all woken up to a number that, two years ago, was treated as taboo. For CLAT 2027 aspirants, this is not just an Economy headline. It is a Polity-meets-Economics question — touching the RBI Act, FEMA, the Seventh Schedule’s Union List entries, and the constitutional architecture of monetary policy.
What Happened: A Slide Long in the Making
The rupee fell 5.2% YTD in 2026. India’s Balance of Payments slipped from a bn deficit in 2022–23 to roughly bn deficit in 2024–25. RBI deployed an estimated 1 bn in net forex sales to defend the currency — and gross sales touched a record 13 bn in 2023–24, a defence that economists like Rajeswari Sengupta (IGIDR) and Soumya Kanti Ghosh (SBI) now call “artificial stabilisation”. Net forex reserves are down to roughly 67 bn.
Constitutional & Statutory Framework
- Seventh Schedule, Union List, Entry 36: Currency, coinage and legal tender.
- Entry 37: Foreign loans.
- Reserve Bank of India Act, 1934: Section 17 (forex reserves), Section 45U (derivatives & money-market definitions), Section 45ZB (Monetary Policy Committee).
- Foreign Exchange Management Act (FEMA), 1999: Replaced FERA 1973; civil-law regime for forex.
- Monetary Policy Framework Agreement, 2015: CPI inflation target of 4% ± 2%.
- FCRA, 2010: Receipts of foreign contributions.
CLAT Angle — Tested Concepts
- RBI autonomy versus Government direction (Section 7, RBI Act).
- Urjit Patel Committee (2014) → flexible inflation targeting.
- Capital-account convertibility roadmap — Tarapore Committees I (1997) & II (2006).
- BoP = Current Account + Capital Account (IMF BPM6 framework).
- Constitutional federalism: monetary policy is Union-exclusive; states have no role.
Key Numbers
| USD/INR (15 May 2026) | ₹95.9 |
| Rupee depreciation YTD 2026 | 5.2% |
| RBI gross forex sales 2023–24 | 13 bn (record) |
| Net forex reserves (May 2026) | ~67 bn |
| BoP 2024–25 | ~ bn deficit |
| CPI inflation target | 4% ± 2% |
Mnemonic — BoP-FALL
Balance of Payments slips · oil imports costlier · Policy band 4±2 · Forex sales heavy · Artificial stabilisation · Lessons unlearnt · Liquidity stress
Test Yourself — 10 MCQs on Rupee, RBI & FEMA
Practice Quiz — 10 CLAT-Style Questions
Click an option to reveal the answer and explanation.
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