Transcription
The Indian rupee has slipped to around 96 rupees per US dollar, making it the weakest Asian currency in 2026.
This depreciation is striking because it's occurred despite strong GDP growth of about 8%, suggesting deeper stress in India's external sector rather than in domestic growth conditions. And let's understand first how the rupee has moved over the years.
During independence, the rupee was fixed at 4 rupees. That's right, 4 rupees and 76 paise per dollar under controlled exchange system. This rate held up until 1966, when wars, drought, falling foreign reserves forced India to devalue the currency.
The oil shocks of the 1970s and then rising external debt pushed it lower. By 1990, the rupee had fallen to around 17 rupees and 50 paise per dollar. Then the 1991 balance of payments crisis marked a turning point. India devalued the rupee. Adopted economic liberalization, moving to a market-determined exchange rate by 1993.
And so growth improved as a result. The rupee, however, continued to depreciate, touching about 43 rupees by the late 1990s. And then in the 2000s, strong IT exports, capital inflows had offered temporary support, but dependence on oil imports kept the rupee volatile.
The 2008 global financial crisis triggered sharp outflows, weakening the currency again. By 2014, the rupee crossed 60 rupees. And over the last decade, we've seen what's happened. It slid from around 62 rupees to nearly 90 rupees per dollar, reflecting sustained external imbalances.
But why does this happen? Why does the rupee keep losing value? The rupee's decline is rooted in structural weaknesses. India runs a chronic trade deficit because it relies heavily on imports such as crude oil, gold, electronics. This keeps demand for dollars high and widens the current account deficit especially when the oil prices rise.
The Indian rupee has been depreciating mainly because of rising crude oil imports, global tensions, increasing demand for the US dollar. So, all of this one way or another is linked to the West Asia conflict.
India imports nearly 89% of its crude oil requirement from other countries making the economy also highly dependent on global oil prices. So, in financial year 25, India imported around 242 million tons of crude oil. That import bill rising to nearly $161 billion. dollars.
Global conflicts, particularly in the Middle East, have pushed oil prices higher and therefore more pressure on India's foreign exchange reserves. Since crude oil payments are made in dollars, Indian companies need more US currency because oil is becoming expensive. And that increases demand for dollars, therefore a direct impact on the rupee in international markets, it gets weakened.
A stronger US dollar, high US interest rates have further added pressure on emerging economies. India is one of those. Another major reason is foreign investors pulling money out of Indian markets due to a high US interest rates. There's a lot of global uncertainty as well. Investors are shifting towards safer US assets.
A stronger dollar, continuous capital outflows has further reduced the rupee's strength despite RBI's efforts to nonstop stabilize the currency. Now, apart from crude oil, India also spends heavily on gold, on edible oil, on fertilizers. Now, if we were to go by the numbers, India spent reportedly over $240 billion on just these four in the financial year of 26.
A falling rupee makes imports costlier. it fuels inflation, widens the trade deficit. It also raises debt servicing costs for companies and the government. It increases the risk of further capital outflows. And this makes the currency slide a real concern for the broader economy.