Dr Noour Ali Zehgeer
I recall Prime Minister Narendra Modi once remarking that a weakening rupee was evidence of corruption and terrorism in the country—an argument the then-UPA government could not counter because, in reality, it carried little financial logic and served largely as political rhetoric. Today, with the rupee touching 92 against the US dollar, the question inevitably arises: how does the present government justify a far steeper fall?
The consequences are no longer abstract. Import-dependent businesses are struggling, inflationary pressures are mounting, and ordinary citizens are paying more for essentials across the board. This is not a challenge that can be met through symbolism or emotional mobilisation; it requires coherent economic planning and credible policy responses. Over the past eleven years, critics argue, the finance ministry has failed to arrest the currency’s decline, weakening manufacturing competitiveness and eroding purchasing power. When the rupee slid to 67 a decade ago, it was portrayed as a national embarrassment in international forums. The present depreciation demands an explanation of far greater urgency.
The Indian rupee’s plunge to a historic low reflects mounting pressure on emerging-market currencies amid intensifying global economic and geopolitical headwinds. Persistent demand for the US dollar and investor caution across global markets have weighed heavily on the domestic unit.
Market analysts point to a confluence of factors: rising geopolitical tensions, elevated crude-oil prices, and sustained dollar strength. Recent warnings by the United States to Iran have raised fears of potential supply disruptions, pushing oil prices higher. For India—heavily dependent on energy imports—costlier crude directly widens the current-account deficit and typically weakens the currency.
Simultaneously, the dollar has strengthened on expectations that US interest rates may remain elevated for longer and because of its traditional role as a safe-haven asset during uncertain times. Investors have shifted funds away from riskier emerging markets toward the relative security of US assets, intensifying pressure on currencies such as the rupee.
Domestic equity markets reflected this nervousness, opening lower as concerns grew over imported inflation, rising input costs, and possible hits to corporate profitability—particularly in oil, aviation, and capital-goods sectors.
The fall has occurred despite apparently strong domestic indicators. India posted 8.2 per cent GDP growth in the September quarter, retaining its position as the world’s fastest-growing major economy. Yet economists warn that prolonged currency weakness could have serious consequences. Costlier imports—especially fuel and essential commodities—may stoke inflation, complicating the Reserve Bank of India’s (RBI) monetary stance and limiting its room to stimulate growth.
Brent crude has hovered around $69–70 a barrel, a worrying level for a country that imports nearly 85 per cent of its oil requirements. Higher energy bills increase dollar demand and further strain the rupee. Month-end importer demand, persistent foreign portfolio investor outflows, and rising US Treasury yields following the Federal Reserve’s decision to hold rates steady have added to the pressure.
There is, however, a partial offset. Export-oriented sectors such as IT services, textiles, and pharmaceuticals could benefit from a cheaper rupee, which improves global competitiveness and boosts earnings in local currency terms. Non-resident Indians remitting money home also gain. But these advantages depend heavily on global demand conditions and may not fully counterbalance the burden on importers and consumers.
Market participants are watching closely for RBI intervention. While the central bank does not defend any specific exchange rate, traders believe it stepped in near the 92 mark to smooth excessive volatility. The path ahead will hinge on geopolitical developments, oil prices, and US economic data—any escalation in Middle-East tensions or fresh dollar rallies could deepen the rupee’s slide.
For households, the implications are immediate. A softer rupee raises petrol, diesel, and aviation-fuel costs, potentially lifting transport expenses and squeezing family budgets. Electronics, appliances, and automobiles—many reliant on imported components—are likely to become costlier if depreciation persists. Companies may initially absorb the blow, but prolonged weakness could force price hikes.
Students planning overseas education and families funding foreign degrees are among the most directly affected, as tuition fees and living expenses rise sharply in rupee terms. Foreign travel, too, becomes more expensive, with airfares, hotel bills, and daily spending climbing alongside the dollar—raising the prospect of softer demand if the currency remains near record lows.
Ultimately, the rupee’s record fall is not merely a domestic story. It underscores how deeply India is now integrated into global financial currents. As international risks multiply, the currency’s trajectory will remain a crucial barometer of investor confidence and economic resilience in the months ahead.
