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Journalism of Courage
Right through September, every passing week, the Indian rupee (INR) has been hitting all-time lows in its exchange value with the US dollar (USD). On September 23, the lowest level of 88.6 rupees to a US dollar was recorded. In other words, an Indian wanting to buy a US good or any foreign good whose price is denominated in US dollars (like crude oil) would need to shell out more than 88 Indian rupees for each US dollar.
To be sure, this slide in the relative value of the Indian rupee hasn’t been sudden. However, it is important to note that the Indian rupee has been losing value to the US dollar at a time when the latter has been losing value against the currencies of almost all the major economies.
The slide
CHART 1 shows how the US dollar performed against other currencies since the start of 2025. As the data shows, while INR lost more than 3% of its value against the USD, other competing economies — such as the European Union, China, Japan, Brazil and South Africa — have become significantly stronger against the dollar. The Indian rupee is in the company of countries such as Bangladesh and Pakistan but even there, Indian currency has slid more. In fact, the rupee has lost 1.3% of its value just over the past one month.
As CHART 2 shows, the rupee’s slide is not just against the US dollar; it has become weaker against other major currencies such as the euro and the pound.
The impact
While a weaker currency makes imports from the rest of the world costlier, it has a silver lining: It makes India’s exports more affordable for the consumers in the rest of the world. It is perhaps for this reason that India’s central bank, the RBI, hasn’t attempted to support the Indian rupee in foreign exchange markets as aggressively as it has done in the past. At a time when the whole world is turning protectionist and unwilling to trade, a weaker rupee may come in handy for India’s exporters, who are already facing stiff US tariffs.
The bigger reasons for the Indian rupee’s slide, however, lie elsewhere. Exchange rates are essentially dependent on relative demand for the currencies. If American demand for rupees outpaces the Indian demand for dollars then the rupee will gain in value against the dollar.
This can happen either because the rest of the world wants to buy India’s goods and services or if global investors want to invest money in India — either in the stock markets by buying shares (Foreign Portfolio Investment or FPI) or by directly investing in new companies and factories (Foreign Direct Investment or FDI).
As it turns out, Trump’s tariffs have damaged India’s already stagnant export growth while FPIs and FDIs are falling or even turning negative because global investors are not happy with India’s GDP growth numbers, as well as the earnings of Indian companies.
GDP is a new weekly feature that will attempt to provide economics and policy insights using credible data. Did you like it? Share your views and queries at udit.misra@expressindia.com
