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Last Wednesday, the rupee slipped past the ₹90 per dollar mark. While this driblet is labelled arsenic ‘psychologically significant,’ the underlying economical factors haven’t changed much. Yet a circumstantial acceptable of caller events has added caller momentum, decisively tipping the scales against the currency.
The rupee’s emergence oregon autumn depends connected 2 main factors: what’s happening successful the market, and however the Reserve Bank of India (RBI) responds.
Some of the large movements successful the marketplace that are weakening the rupee see unit connected exports owing to U.S. tariffs; a abrupt surge successful golden and metallic imports adding value to the ballooning import bill; and astir importantly Foreign Portfolio Investors (FPIs) pulling retired successful ample numbers from Indian equity.
And what is the RBI doing? Till conscionable a twelvemonth ago, the RBI was firefighting by selling dollars to assistance apprehension the descent of the rupee. But this twelvemonth the RBI has changed its tactics. They person decided to intervene little and little and fto the rupee question its ain level. More than marketplace dynamics, this alteration successful RBI’s tack has allowed the rupee to breach the 90 mark.
Exports sliding
First, exports. The 50% tariff connected Indian goods announced by U.S. President Donald Trump has had a tangible, bruising impact. When Indian goods became 50% much costly for American buyers, request dropped and exporters earned less dollars, creating a scarcity that drove the rupee down.
The harm is disposable successful caller data. Exports to the U.S.— India’s largest spouse — fell by implicit 12% successful September and 9% successful October this year, dragging full monthly exports down by astir 12% year-on-year successful October 2025.
Yet, a wider lens reveals a astonishing resilience. Despite the U.S. slump, cumulative exports for the April-to-October play really roseate marginally by 0.5% to $253.8 cardinal successful 2025, compared to 2024. This divergence suggests that portion the U.S. doorway is closing, Indian exporters are uncovering windows elsewhere.
It is this resilience that leads economists similar Dr. Pronab Sen to downplay the panic. ‘It’s not conscionable the commercialized shortage with the U.S., it’s the wide commercialized position,’ Dr. Sen argues, noting that the export diminution is not ample due to the fact that ‘we’ve made up successful different countries.’
However, humanities information offers small comfortableness for the future. Warning signs for November are flashing red: India’s manufacturing Purchasing Managers’ Index (PMI) has fallen to a nine-month low, and the caller export orders sub-index has slipped to a 13-month low, suggesting the worst of the tariff symptom whitethorn beryllium yet to come.
Imports surging
Second, imports. While falling exports are a concern, a monolithic surge successful precious metallic imports person besides played a relation successful the depreciation of the rupee.
In September and October, Indian purchases went vertical. Data shows that golden imports skyrocketed by astir 200% year-on-year successful October to deed astir $14.7 billion. Silver imports were adjacent much dramatic, surging by 528% to $2.7 billion. Despite record-high planetary prices, importers aggressively stocked up — paying premiums successful September and October — driven by some the festive play request and a home formation to safe-haven assets.
Dr. Sen diagnoses this circumstantial frenzy not arsenic emblematic festive consumption, but arsenic a classical ‘flight to safety.’ ‘It’s not that we abruptly developed a fascination for gold,’ Dr. Sen explains. ‘But what we’ve seen precocious is an unexpected surge due to the fact that radical are disquieted astir alternate assets.’ He argues that home investors, spooked by volatility, are pulling wealth retired of the banal marketplace and parking it successful bullion.
Economically, this created a ‘dollar drain.’ To concern these monolithic purchases, businesses sold rupees to bargain dollars, flooding the marketplace with section currency. Thus, the rupee’s depreciation was driven little by the tariff deed to exports and much by this structural commercialized imbalance — the chronic necessity to walk dollars connected imports specified arsenic golden and silver.
FPI flight
Third is Foreign Portfolio Investors (FPIs) — the planetary heavyweights who determination wealth into Indian stocks. By December 3, these investors had pulled retired a staggering $17 cardinal from Indian equities successful 2025 unsocial (Chart 3). This marks the highest calendar-year outflow successful astatine slightest 2 decades, surpassing the sell-offs of 2022 and 2008. When overseas investors leave, they merchantability rupees to instrumentality their dollars home. On this front, 2025 has been exceptionally harsh, accelerating the currency’s weakness.
These combined forces — stalling exports, surging imports, and fleeing superior — explicate wherefore determination is immense unit connected the rupee. But they don’t afloat explicate wherefore the rupee breached the 90 mark.
As economist Dr. Zico Dasgupta argues, marketplace unit is simply the fuel; the cardinal slope determines whether to fto it burn. ‘I would similar to separate betwixt the deterioration of existent relationship and superior relationship flows and the descent of the rupee,’ Dr. Dasgupta says. ‘All 3 factors that you mentioned person contributed to the deterioration of the existent and superior relationship flows, putting adverse unit connected overseas speech reserves.’
However, helium notes that the currency’s existent worth is simply a argumentation decision. ‘The descent of the rupee reflects RBI’s contiguous argumentation of maintaining a managed-float,’ Dr Dasgupta explains. ‘This is successful opposition to RBI’s earlier argumentation betwixt mid-2022 and precocious 2024, erstwhile it mostly kept the dollar speech complaint unchanged contempt a antagonistic unit connected the existent relationship and superior account.”
What did RBI do?
To recognize the rupee’s existent trajectory, it is indispensable to analyse the cardinal bank’s existent marketplace activity. The definitive grounds of this involution is recovered successful the Balance of Payments data, specifically nether ‘Reserve Assets.’ In this accounting framework, the signs bespeak the absorption of flow: a antagonistic fig means the cardinal slope is buying dollars to summation reserves, portion a affirmative fig means it is selling dollars to enactment the currency. By tracking these nett flows from 2022 done precocious 2025, the information reveals a wide displacement successful strategy — from progressive defence to a important simplification successful marketplace intervention.
Data confirms this calibration. In erstwhile high-pressure episodes, the cardinal slope aggressively defended the currency, selling implicit $30 cardinal successful the 4th ending September 2022 and astir $38 cardinal successful the 4th ending December 2024.
By comparison, the RBI’s manus is present overmuch lighter. In the 4th ending September 2025, amid akin turmoil, the cardinal slope sold conscionable $10.9 cardinal — a important sum, but acold beneath the ‘firefighting’ peaks of the past. This reduced involution signals that the RBI is nary longer warring to clasp a circumstantial level, but simply smoothing the inevitable slide.
The cardinal bank’s calculated gamble is that a weaker rupee volition enactment arsenic a daze absorber, making Indian goods cheaper abroad, and offset the tariff pain. Experts, however, are divided connected whether this textbook mentation volition enactment successful reality.
Dr. Sen offers a pragmatic endorsement of the strategy, provided the execution is controlled. ‘Is that steadfast for the economy? Yes,’ Dr. Sen argues, viewing the depreciation arsenic a indispensable adjustment. His interest is velocity, not value. ‘Sharp jerks volition beryllium precise disruptive,’ helium warns. ‘But if you gradually fto it depreciate and find its ain level, past it’s good due to the fact that radical past person clip to adjust... to renegotiate contracts.’ For Dr. Sen, a dilatory bleed implicit 3 oregon 4 months is preferable to a abrupt 15% amputation.
Dr. Dasgupta, however, is skeptical astir the precise premise of the RBI’s gamble. He points to a troubling post-COVID anomaly: for years, the rupee fell successful nominal terms, yet Indian goods didn’t get cheaper successful existent presumption owed to home terms hikes. ‘Depreciation of the nominal speech complaint does not warrant existent speech complaint depreciation,’ Dr. Dasgupta cautions.
While helium acknowledges that debased ostentation has precocious helped the Real Exchange Rate fall, helium remains sceptical that a cheaper currency tin flooded the monolithic partition of anemic U.S. demand. ‘The antagonistic effect of anemic U.S. import request tin negate the affirmative effect of speech complaint depreciation,’ helium argues. For Dr. Dasgupta, the descent isn’t a solution, but a grounds of ‘larger structural problems’ that a elemental currency accommodation whitethorn not beryllium capable to fix.
