Reserve Bank of India (RBI) Governor Raghuram Rajan said on Tuesday India is taking steady steps towards an increasingly free currency, but will avoid "big bang" liberalisation.
China's accession to the International Monetary Fund's (IMF) benchmark currency basket on Monday was seen as a victory for Beijing's campaign for recognition as it had put the yuan alongside the dollar, euro, pound and yen.
Some economists say it was also a blow for India, as it striked a virtual parity with China in the early 1980s.
"We are steadily moving towards being a much more open economy, while keeping some of the concerns about stability, making sure we have things broadly under control," Rajan said after the central bank's monetary policy announcement on Tuesday, in response to a question on the yuan.
He detailed recent steps, including moves by the central bank, to allow companies to more easily raise rupee debt offshore.
Asked about the impact of the yuan's inclusion in the IMF's Special Drawing Rights (SDR) basket on the rupee, Rajan said there could be a further softening of the Chinese currency, but India would not shift accordingly.
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"(The yuan) devalued initially but then stopped, and it has come up a little since then. Perhaps with the Chinese inclusion in the SDR basket you may see a little more of that," he added.
"We've said repeatedly that our intent is to minimize volatility in the exchange rate rather than target a particular level," he said during the press conference.