The central bank's "proactive" management is likely to ensure the Indian rupee trades between 66 and 68 against the US dollar in the next 12-18 months, except for one risk, according to Deutsche Bank.

On Thursday, the rupee opened at 66.87 against the US dollar.

"Indeed, the Reserve Bank of India (RBI) has enough FX (forex) reserves in its coffer, $353 bn or about 9-10 months of import cover, to intervene decisively in the FX market, if need arises," said the bank in its Asia Economic Monthly report, reports PTI.

There is, however, one risk to the Indian currency. If China devalues its yuan, the rupee could slide to the 68-70 range, said the bank.   

"However, such a range shift in the rupee would happen only with the explicit support of RBI, which in order to restore exchange rate competitiveness will likely not stand in the way of a sharper depreciation of the rupee," it said.

The bank said India's economic growth would depend on the Narendra Modi government's approach to fiscal consolidation, arising from a range of macroeconomic realities. 

"If the authorities are forced to cut back on capital spending to maintain budget consolidation, growth will suffer," said the bank, adding: "Fiscal weakness could therefore either translate into a wider deficit or poor growth." 

Falling crude oil prices have given some cushion to the rupee, as lower prices translate into lower import bill for India and thereby lesser impact on the rupee, even as flight of capital due to foreign institutional investors (FIIs) going on a selling spree poses a limited challenge on the currency front.

Last Friday, the 14-member OPEC could not arrive on a decision to cut oil production to stem falling crude oil prices. The OPEC decision is set to bring more relief than the 22% reduction in India's crude oil import bill, which was $112.74 billion last financial year for buying 189.43 million tonnes.

The 22% estimate was in June this year, which said falling crude oil prices in the global market would reduce India's oil import bill to $88 billion.

But with prices consistently falling for the Indian crude oil basket from $59.07 per barrel in April to $42.40 in November this year, the savings could be much more as the trend of declining prices is expected to continue in the near future, thanks to the OPEC.

The price was $36.75 per barrel on 9 December, assuming a conversion rate of Rs 66.75 to the US dollar.

India's real GDP is expected to grow at 7.5% in 2015-16 and 8% in the next year, according to Fitch Ratings. 

In the second quarter, the economy had expanded by 7.4%.