An undervalued exchange rate might have made sense in the past for countries that had weak firms and small domestic markets. India is in a very different position today from the export-led East Asian tigers when they embarked on their growth path. The ideal exchange rate for us is neither strong nor weak, it is just right.
Typically, market forces get you to this Goldilocks rate. Yet there are circumstances where rapid capital inflows or outflows can move the rate to a level that is unlikely to be supported by fundamentals.