India’s currency crisis deepened on Thursday as the rupee slipped to a lifetime low of ₹88.37 per U.S. dollar, breaching the earlier record of ₹88.36 set just last week. The fall reflects ongoing strain from U.S. tariff measures, weak global capital inflows, and mounting concerns over India’s trade balance.
Rupee Breaches Historic Levels
Market data showed the rupee steadily weakening through the day before crossing the crucial 88 mark. Currency dealers noted that strong demand for U.S. dollars, coupled with subdued investor confidence, left the local unit vulnerable.
“This breach was expected, given the combination of tariff headwinds and weak foreign inflows,” said a Mumbai-based FX strategist.
Tariffs at the Core of the Crisis
- Washington’s pressure on Indian exports: The U.S. has levied tariffs of up to 50% on Indian goods, particularly textiles, gems, and engineering items. These penalties are linked to New Delhi’s continued purchases of discounted Russian oil.
- Trade imbalance widening: With exports facing higher barriers abroad and imports continuing at their usual pace, India’s current account deficit risks expanding further.
- Corporate worries: Export-driven industries are reporting shrinking orders, with many small and medium enterprises fearing job losses if tariff disputes linger.
RBI’s Firefighting Role
The Reserve Bank of India (RBI) has been actively intervening in the currency market to limit volatility. By selling dollars from its foreign exchange reserves, the central bank hopes to slow down the pace of depreciation.
However, analysts caution that RBI cannot fight global trends indefinitely. “The central bank can smooth volatility, but it cannot reverse structural shocks caused by U.S. policy,” said an economist at a leading investment bank.
Broader Economic Consequences
The rupee’s slide is more than a symbolic blow; it has tangible consequences:
- Costlier imports: Crude oil, machinery, and other essentials will become more expensive, which may feed into higher inflation for consumers.
- Investor flight: Foreign portfolio investors have been pulling money out of Indian equities and bonds, wary of volatility and policy uncertainty.
- Policy dilemma: Rising inflation could force the RBI into tighter monetary policy, even though growth is already under pressure.
Government Seeks Relief Measures
The Indian government is reportedly considering fiscal support tools such as reducing Goods and Services Tax (GST) on key sectors to cushion demand. Negotiations with Washington remain in focus, but a quick resolution to tariff tensions appears unlikely.
Trade officials emphasize that India will continue exploring diplomatic channels to protect its export markets while simultaneously diversifying global trade partners.
What Lies Ahead for the Rupee?
The outlook for the rupee will depend on several interlinked factors:
- Tariff negotiations with the U.S. – Any progress could stabilize investor sentiment.
- Global oil prices – Higher crude costs would worsen India’s import bill.
- Federal Reserve policy – A strong dollar driven by U.S. interest rates will keep emerging market currencies under strain.
- Foreign investment flows – Fresh inflows into Indian equities and bonds could offer some relief if global conditions improve.
Conclusion
The breach of ₹88.37 per U.S. dollar marks a critical moment for India’s currency. With U.S. tariffs showing no signs of easing and external risks rising, the rupee faces continued pressure. Policymakers are balancing between inflation control, trade diplomacy, and market stability, but recovery will hinge on how quickly tariff frictions ease and investor trust returns.
