The Indian Rupee recently reached its all-time low (crossing 96 per dollar) against the US Dollar. It has a direct impact on the Indian economy as well as the pocket of a common man.
Vivek Saxena, Ayodhya
The Indian Rupee recently hit its all-time low against the US Dollar (crossing 96 per dollar), a new record low. The rupee has fallen about 5.2% against the dollar since the Iran-US conflict began in late February. This is a big warning sign for the Indian economy. Geopolitical tensions and rising crude oil prices have made imports expensive, causing inflation at the domestic level and putting a huge strain on the general public’s budget.
The seriousness can also be gauged from the fact that on Tuesday, India Ratings and Research has predicted India’s economic growth rate to decline from 6.9 percent to 6.7 percent in the current financial year, saying that slowdown in both demand and supply and global uncertainties will be the main reasons for this. It is a matter of relief that India Ratings has said that despite the recent increase in fuel prices, retail inflation may remain at 4.4 percent, which is within the target range of RBI.
Dollar is the currency in which most of the trade is done in the world market. If the demand for dollars increases or international crude oil prices increase, the value of the rupee starts decreasing. When we have to pay more rupees than before to buy one dollar, we say that the rupee has weakened. The rupee’s weakness is not just a currency devaluation, but a mirror of macroeconomic pressures. Whenever the rupee weakens against the dollar in the global market, it directly impacts the Indian economy as well as the pocket of a common man.
When news comes that the rupee has fallen to a historic low against the dollar, many people leave it as just news related to the stock market or big businessmen, but the reality is that the health of the rupee has a direct impact on your kitchen, children’s education and pocket. Not only this, traveling abroad, getting education abroad or using foreign software and services becomes more expensive for Indian citizens.
India imports about 80-85% of its crude oil needs, which are paid for in US dollars. Middle East tensions have severely affected oil prices and supplies. Now if the rupee weakens, oil companies will have to spend more money to buy oil. When oil becomes expensive, the prices of petrol and diesel will increase. In such a situation, it is clear that diesel becoming expensive means freight transportation becoming expensive. Due to this, the prices of every small and big thing including vegetables, fruits and grains will increase.
Today there is pressure on the Indian currency. The year 2025 was a time when central bank intervention sharply increased, leading to ‘artificial stabilization’ of the rupee. Although market interventions meant to maintain the currency at a certain level may delay the adjustments needed to correct underlying imbalances in the economy, the rupee’s problems are far more serious.
The currency’s weakness comes at a time when the Indian economy is growing at a relatively good pace, with both inflation and current account deficit low. In the year 2025, when the dollar index fell from 109 to 98, the rupee depreciated by 4.7 per cent against the dollar. These problems have arisen due to pressure on both capital and current accounts. Capital is flowing out of the country and foreign and domestic investors are looking for alternative investment options.
Investors appear to be more bullish on the prospects of East Asian economies. On the current account, a sharp rise in global crude oil prices is exerting pressure, which will make financing challenging.
This is the reason why recently Prime Minister Narendra Modi appealed to the people of the country to use less petrol and diesel, use public vehicles, not travel abroad for some time and not buy gold. Petrol prices were increased twice within a week. The situation is such that due to global uncertainty and geopolitical conflicts, foreign investors are withdrawing money from Indian markets and running towards safe investments (like dollars).
Due to the strength of the US economy, the dollar continues to dominate the international market, due to which the rupee is under pressure along with other Asian currencies. It would not be wrong to say that if the same situation continues, there will be pressure on the Reserve Bank of India to increase interest rates to control the rising inflation, due to which the loan EMIs of the general public may increase, although the RBI is continuously intervening in the market and trying to stabilize the rupee by selling dollars from its foreign exchange reserves.
It is normal for a slight decline in the currency of a progressing country like India. The size of our economy is increasing. Consumption is increasing. Imports are still higher than exports. It is natural that this will put pressure on the rupee over time. If you spend in dollars, it will definitely increase your problems. If you are thinking of sending your child to America for a Masters degree, then the budget made last year will suddenly seem less because you will have to spend by converting rupees into dollars. That is, for a person who has to spend in foreign currency, the weakening of the rupee is not good news.
In the present situation, to make the country self-reliant in the energy sector, alternative and renewable energy sources will have to be rapidly adopted. Reducing trade deficit by encouraging exports of sectors like pharma, engineering and IT is a permanent solution. This situation is a serious warning for policy makers.
Estimates warn that if the currency’s value remains below Rs 95-96 per US dollar, India’s deadline to achieve the historic $5 trillion target could be pushed to fiscal 2030. If prompt and far-reaching steps are not taken to arrest the fall of the rupee, it could cause serious damage to the economic growth of the country and the purchasing power of the common man.
The central bank has intervened in the markets at times in the past, although the approach should be to allow the currency to move freely. The rupee should act as a shock absorber. At present, the focus should be on addressing the problems of the economy. Steps need to be taken to attract foreign capital, enhance domestic competitiveness and promote goods exports. There is an urgent need to remove structural barriers to development.
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