Rupee at Historic Low: 9% Real Depreciation Could Reshape India's Economy
Rupee at Historic Low: 9% Real Depreciation Could Reshape India's Economy
Rupee slides to record lows as trade deficits widen and dollar strength persists, with experts weighing inflation, exports, and potential long-term gains from domestic production.
The rupee has depreciated 4.7% year-to-date in 2025, and more than 5.8% over the last 12 months. In Real Effective Exchange Rate terms, the weakness is even starker, with year-to-date weakness at about 8.6% until November and 12.1% over the past year. Analysts at BofA Securities note that this is a sizable move, drawing comparisons with past depreciation episodes in 2018, 2013, and 2008 which reshaped the economy in various ways.
In a separate development, the rupee touched a fresh lifetime low of 90.52 per dollar on Friday, extending its slide this year. The decline is attributed to a widening trade deficit, firm dollar demand from corporates, and US tariffs. The Reserve Bank of India has stepped in to stabilize market volatility at times, signaling ongoing vigilance from the central bank.
The short-term consequences are mixed. Higher import costs can worsen inflation and squeeze corporate margins, particularly for energy and commodity buyers. On the flip side, a weaker rupee can boost export competitiveness and encourage domestic production, potentially supporting longer-term growth if capital flows stabilize and trade uncertainty eases. Policymakers are balancing these dynamics while investors monitor currency moves alongside broader trade policy and tariff developments. Structural reforms to spur domestic manufacturing and reduce import dependence may be pivotal in determining whether the depreciation yields durable gains.
Cover image source: Rupee hits record low as U.S. trade stalemate drags on, outflows pinch 🔗
