The Indian rupee plunged to a new record low of ₹88.37 per U.S. dollar on Thursday, breaking past its earlier all-time low of ₹88.36 set last week. Market experts attribute this persistent decline to escalating tariff disputes with Washington, weak foreign investor appetite, and rising pressure on India’s external accounts.
Record Fall Marks Growing Pressure
Currency traders said the rupee came under heavy selling pressure as global demand for dollars surged. Importers rushed to cover payments, while exporters hesitated, adding to market volatility.
“Every new tariff measure from the U.S. translates into pressure on Indian exports and weakens the rupee’s sentiment,” said a senior forex dealer in Mumbai.
Tariffs Driving Trade Uncertainty
The U.S. has been steadily tightening tariff policies on India, targeting sectors like textiles, jewelry, and engineering goods. Current duties are as high as 50% for some products, reducing India’s competitiveness in its largest export market.
- Exports hit badly: Orders from U.S. buyers are slowing down, leaving exporters worried about their margins.
- Imports remain strong: With essential commodities like crude oil and electronics still flowing in, India’s trade deficit continues to widen.
- Employment risk: Small and medium-sized exporters warn of job cuts if the situation does not stabilize soon.
RBI Attempts to Calm Markets
The Reserve Bank of India (RBI) stepped in to limit the rupee’s volatility by selling dollars from its reserves. The intervention provided only temporary relief as global investors remain cautious.
While RBI has stated that it does not defend a fixed rupee level, its actions show concern about the impact of a prolonged slide on inflation and financial stability.
Inflation and Investment Concerns
The currency’s weakness brings multiple challenges for the Indian economy:
- Rising fuel costs: A weaker rupee makes crude oil imports costlier, raising transport and energy prices.
- Higher inflation risk: More expensive imports could lead to broad-based price increases, hurting consumers.
- Foreign capital outflows: Global funds are reducing exposure to Indian markets, amplifying downward pressure on the rupee.
Policy Makers Explore Relief Measures
Reports suggest the government is reviewing options such as lowering GST on key goods to spur domestic demand. At the same time, trade talks with the U.S. are being closely monitored, though quick relief seems unlikely.
Officials are also considering steps to boost alternative export markets and encourage capital inflows through policy incentives.
Key Factors to Watch
The rupee’s direction in the coming weeks will depend on:
- Tariff negotiations with the U.S. and whether tensions ease.
- Global oil and commodity prices, which directly impact India’s import bill.
- U.S. Federal Reserve policy, as a stronger dollar globally hurts emerging market currencies.
- Foreign investor sentiment, which will determine the flow of capital into Indian assets.
