Source: The Times of India
December 3, 2025: The Indian Rupee reached its lowest price against the US Dollar in history, falling to ₹90, indicating a rapid shift in the attitudes of both global and domestic economies. To put this into perspective, the rupee has depreciated by an average of 3.5% per annum over 25 years. It has lost almost 5% in crossing that long-term trend in 2025 alone. These 25 years have been marked by significant shocks, including the global recession of 2008 and the COVID-19 crash of 2020, which demonstrate the rupee's volatility. To most people, this would be just another financial news item until they notice that it is quietly affecting petrol prices, groceries, EMIs, travel, and even personal budgets. The article simplifies it in simple terms: what made it fall, how it impacts daily life, and what to do next.
Source: The Times of India
Reuters has recently reported that INR is the worst-performing currency in Asia. The following chart clearly shows this by comparing popular currencies with the INR.
Source: Reuters
To understand the whole situation in layman's language.
Suppose you purchase a 10-rupee bottle of Bisleri at a local stockist. Take a heatwave now: demand is high, supply is low, and the same bottle is expensive overnight. This is indeed the case with the rupee. Both the demand and supply of dollars are high and tight, respectively. Therefore, importers are forced to pay an extra amount of rupees to purchase one dollar. This puts a strain on the prices of all imports by India.
The rupee's decline against the US dollar is significant because the dollar is the main currency for international trade, affecting India's economy more than other currencies.
The primary drivers that caused this:
Record trade deficit: India's merchandise trade gap hit $41.68 billion in October 2025, fueled by high import costs for commodities such as bullion and metals and surging dollar demand from importers.
Foreign portfolio outflows: Investors pulled out about $17 billion from Indian equities in 2025, reallocating to other markets despite stable GDP growth, draining liquidity and boosting USD demand.
US trade deal delays: Stalled negotiations under President Trump, coupled with steep US tariffs on Indian exports (some up 50%), eroded business confidence and external balances.
RBI’s Role: Until Mr Shaktikanta Das was Governor of the RBI, when the rupee weakened, the RBI would often sell its dollar reserves—this increases rupee supply (by swapping dollars for rupees), which usually strengthens the rupee. Now, after Mr Sanjay Malhotra has chaired the RBI, there have been strategic changes in the approach — RBI seems to have a looser approach. It’s okay to let the rupee move with market forces, as long as things don’t get chaotic. So when the rupee dipped sharply, there was less “defence” from the RBI than what many expected or assumed. This move primarily stems from the fact that the prior approach directly affected India's foreign reserves.
Hands down, the rupee's depreciation will boost exporters' revenue, and foreign remittances will benefit NRI families.
It is really key to understand the Catastrophic impact caused by this Rupee devaluation:
External Debt: India’s external debt is approximately $ 747 billion. As the rupee is weak, the value of this debt in rupees automatically increases. For example, suppose that last week, $1 was worth 84 rupees, and now $1 is worth 90 rupees. The amount India will have to repay in rupees is significantly higher, even though the dollar remains the same. This strains the government's finances and undermines the country's external stability.
India's import costs for essentials such as crude oil, edible oils, and electronics rise as the rupee weakens, thereby increasing household expenses.
Example: Suppose a barrel costs $63.
At ₹84 per dollar → ₹5,292 per barrel
At ₹90 per dollar → ₹5,670 per barrel
That’s about a 7% increase purely due to currency depreciation. Higher fuel costs then flow into transport, logistics, food prices, and electricity — affecting every household.
General Inflation: Due to higher fuel prices, transport costs will generally increase, leading to higher flight and bus fares. Groceries and consumables become expensive.
**Overseas expenses **are rising: This will especially affect students planning their international education, including fees, living costs, foreign travel and tourism, and health care.
Household Budget Strain: Though inflation in India has been stable, it could raise the prices of everyday goods, weaken savings, and increase overall expenditure.
The current account deficit increases due to a higher import bill.
However, there is considerable narrative that India remains one of the fastest-growing economies, with a rapidly expanding GDP. Thus, it is essential to understand that though GDP is outshining, it is not the only economic indicator. It is a vague indicator and doesn’t show relative strength.
Understanding potential solutions, such as market operations and trade deals, can help you see how economic policies aim to stabilise the rupee and protect your finances.
Open market operations**:** This could be done by selling dollar-denominated bonds and using the proceeds to increase foreign exchange reserves.
**Trade Deal with ****the **US: The trade deal could increase Indian exports to $500 billion by 2030, up from the current $130 billion. Increased exports would surge the dollar inflow, ultimately increasing demand for the rupee.
It is not impossible to surpass the $100 mark per dollar if global uncertainties persist. Volatility is a characteristic of emerging-market currencies, and periodic depreciation is commonplace; however, even with effective reforms, India can still put its long-term economic direction back on track.