Rupee Slide Past 90 and Its Economic Ripple

Understanding the Rupee Decline

Rupee Slide Past 90 and Its Economic Ripple: The Indian Rupee breaching the 90-mark against the US Dollar highlights a sharp weakening trend despite strong domestic conditions. India recorded 8.2% GDP growth and inflation near 1%, yet the currency has fallen by more than 5% in 2025. Depreciation occurs when the rupee loses value compared to foreign currencies in open market trading.

Static GK fact: The Indian Rupee was decimalised in 1957, dividing it into 100 paise.

Trade Deal Uncertainty

Concerns around the stalled US-India Trade Deal have intensified pressure on the rupee. Steep proposed US tariffs of up to 50% on Indian goods reduce export competitiveness and weaken investor sentiment. Markets often respond to uncertainty by shifting capital towards safer currencies.

Capital Outflows and Market Behaviour

Large withdrawals by Foreign Portfolio Investors (FPIs) have contributed significantly to the currency slide. FPIs frequently reallocate funds to global markets offering higher returns, treating India as a liquidity source. This outflow increases dollar demand and weakens the rupee further.

Static GK Tip: FPIs are regulated by the Securities and Exchange Board of India (SEBI).

Trade Deficit Pressures

India’s widening trade deficit has played a major role in the depreciation. Higher imports of gold, electronics, and machinery combined with softening exports to key markets have raised dollar requirements. As import demand grows, the rupee faces additional downward pressure.

Speculative Dollar Demand

Importers expecting further rupee weakness often front-load their dollar purchases. This speculative behaviour amplifies short-term volatility. Continuous buying of dollars adds pressure on the currency even in periods of stable macroeconomic performance.

Negative Economic Impacts

India imports nearly 90% of its crude oil, making the country highly vulnerable to foreign exchange movements. A weaker rupee increases the cost of fuel, edible oils, and other essentials, pushing imported inflation higher. Fertilizer imports become costlier, expanding the government’s subsidy burden. Companies with dollar-denominated debt also face higher repayment costs.

Static GK fact: India is the world’s third-largest oil consumer after the US and China.

Positive Economic Outcomes

A depreciating rupee enhances export competitiveness, making Indian goods cheaper in global markets. Sectors like textiles, IT services, and pharmaceuticals may benefit from improved pricing. Remittances from overseas workers also gain value in rupee terms, supporting domestic consumption.

Measures to Stabilise INR

Monetary policy tools include RBI’s foreign exchange interventions, raising interest rates to attract capital inflows, and engaging in currency swap agreements. These strategies help reduce excessive volatility.
Fiscal measures focus on reducing import dependency, diversifying export markets, strengthening FTAs, and attracting higher FDI through infrastructure development and ease-of-doing-business reforms.

Static GK Tip: The Reserve Bank of India was established in 1935 under the RBI Act.

Static Usthadian Current Affairs Table

Rupee Slide Past 90 and Its Economic Ripple: