Should the Falling Rupee against the US Dollar Worry us?

The Indian economy has been facing a series of trade-related issues with the U.S. since the first quarter of this year. With the introduction of tariffs on goods traded, India has seen many of its crucial industries affected throughout the year.

In the case of the Indian rupee, the value was really volatile at the beginning of this year. With the tariffs put in place, the industries started to feel the pinch of their effects. The Indian rupee started to show its volatile nature in the economy, with traders and economists being equally perplexed by the situation.

As the situation continues to progress through the year, we are in December, and now the Rupee has plummeted to more than 90/- to the US dollar. This is the lowest the dollar has reached so far. Considering this being the case, we have reasons to worry. Some of the reasons mentioned going forward will make a lot of sense. Fall in Exports With the increase in the imports of energy and gold, the trade deficit of our nation has widened significantly. This makes India pay a lot more for the mentioned goods to the foreign sellers. This adds to the pressure on the traders to export, and if we don’t keep up with the global demands, we can see the Indian rupee weaken a lot further. If we look back to October 2025, the trade deficit came to the tune of $43 billion. With the tariff of 50% from the US, which is relatively higher than our Asian counterparts, it does add to a big disadvantage. This makes our exports a lot less uncompetitive.

At the moment, we should probably allow the currency to depreciate, as it can lead to some amount of flow of goods to the export markets. This has been witnessed in the past as well, and given the present situation, it holds good. In terms of services, it seems to be doing well, as not many stringent measures are put in place. In that case, we stand to gain, and we can build some traction. Reduced Capital Inflows In 2025, the inflow of new investments was weak. The capital investments and portfolio investments have not been great throughout the year. The widening trade gap is making it difficult for India to picture the currency remaining strong. This is invariably affecting the job creation and expansion of company operations. It is definitely hitting the Indian corporates negatively.

The Inconclusive Trade Deal with the US

The negotiations have been ongoing since the announcement of the new tariffs. As of now, we have not been able to strike a deal yet. This could add to our advantage if the tariffs come down from 50% to 10-15%. If we can achieve this, it would act as a catalyst to help in our currency appreciation to higher levels. It would help to improve exports and also help in a healthy flow of FDI into India. Market sentiments would show some improvement, and in turn, add to more inflow of money.

Considering the current situation, it looks like India is undergoing a phase, and if India can get back up from this conundrum sometime in 2026. To know more on the sudden falls of the Indian Rupee against the US Dollar, watch this YouTube short: https://youtube.com/shorts/ivlUzfTxL5A?feature=share