The rupee is actually on a free-fall touching the 91/$ mark. Given the sharp downward spiral within the foreign money, Pankaj Chaudhary, the Minister of State, Finance cited the next commerce deficit, evolving prospects of India–US commerce settlement talks, and comparatively weak capital account assist as the important thing elements exerting stress on the foreign money. He was talking on the Lok Sabha.
The Indian rupee weakened sharply in late November and early December 2025, touching file lows a number of occasions in opposition to the US greenback. The rupee closed at Rs 89.41 per US greenback on November 21, slipped to Rs 89.64 on December 1, fell additional to Rs 90.42 on December 4. Indian Rupee fell additional and breached the 91 mark on December 16.
Why is the rupee underneath stress
Replying to a query within the Lok Sabha, Chaudhary mentioned the rupee’s motion is influenced by a number of home and international elements. “Numerous home and international elements affect the alternate charge of the INR, such because the motion of the Greenback Index, pattern in capital flows, stage of rates of interest, motion in crude costs, present account deficit and so on,” famous the written reply by MoS finance.
Widening commerce deficit
The assertion highlighted that in FY26, the rupee has come underneath stress primarily on account of a widening commerce deficit and uncertainty linked to ongoing developments in India’s commerce settlement with the US.
India is going through a steep 50% tariff from the US, and Mexico has additionally introduced that it’ll improve tariffs on Indian imports to 50%, efficient January 1. India and the US are at present holding a number of rounds of talks to succeed in a commerce settlement that might assist safe a discount in these tariffs.
Sturdy greenback globally
The rupee has additionally weakened as a result of power of the US greenback worldwide. Actions within the Greenback Index, pushed by international threat sentiment and expectations round US financial coverage, have led to capital transferring in direction of greenback belongings. This has diminished demand for rising market currencies just like the rupee.
Weak capital inflows
Comparatively mushy assist from the capital account has damage the rupee. Decrease international portfolio inflows and cautious international traders have restricted the supply of international foreign money within the home market, making the rupee extra susceptible in periods of stress.
World elements and oil costs
Exterior elements similar to crude oil costs, geopolitical occasions and coverage actions by main central banks have additionally performed a job. Increased oil costs improve India’s import invoice, elevating greenback demand. World occasions and OPEC+ choices proceed to have an effect on foreign money markets, together with the rupee.
Steps taken by the RBI to spice up foreign exchange inflows
MoS in his reply additionally highlighted steps taken by Reserve Financial institution of India (RBI) to spice up international alternate inflows.
In November 2025, it relaxed export credit score compensation norms by extending the utmost credit score interval from one yr to 450 days for each pre-shipment and post-shipment export credit score disbursed until March 31, 2026.
In October 2025, the RBI elevated the time restrict for foreign exchange outlay in merchanting commerce transactions from 4 months to 6 months. It additionally allowed authorised seller banks to lend in rupees to non-residents in Bhutan, Nepal and Sri Lanka, together with banks in these international locations, to facilitate cross-border commerce.
In August 2025, non-residents sustaining Particular Rupee Vostro Accounts for commerce settlement in rupees have been permitted to take a position their surplus balances in central authorities securities, together with treasury payments.
Earlier, in Could 2025, the RBI eliminated the requirement for international portfolio traders to adjust to short-term funding and focus limits for investments in company debt securities.
The written reply famous that RBI intently displays the international alternate market and steps in to curb extra volatility at any time when required. It additionally retains an in depth watch on international developments that may affect the USD-rupee alternate charge, together with financial coverage actions by main central banks, key international financial information, OPEC+ choices, geopolitical developments, and every day actions in G-10 and rising market currencies.
Nonetheless, the federal government reiterated that the rupee’s worth is market-determined and interventions goal solely to easy sharp actions, not defend any particular stage.
Impression on the financial system
The federal government mentioned a weaker foreign money may also help enhance export competitiveness however may push up the price of imports. “Nonetheless, the general influence of alternate charge depreciation depends upon the extent of the pass-through of worldwide commodity costs to the home market,” the assertion famous
Regardless of the rupee’s depreciation, the federal government maintained that India’s macroeconomic fundamentals stay robust. “At current, the macroeconomic fundamentals of the Indian financial system stay robust, supported by strong home demand, moderating inflation, improved company steadiness sheets and sustained fiscal self-discipline,” the assertion famous.
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