Rupee at record low signals end of India’s cheap-money era
Rupee at record low signals end of India’s cheap-money era
Rupee sinks to a new low as energy costs rise, pushing RBI policy into sharper focus and stoking bets on potential rate moves.
India's rupee slipped to a record low as higher energy import costs squeeze the balance of payments and prompt questions about the pace of RBI policy tweaks. Traders and bankers in Mumbai watched the currency tumble as imports remain expensive and capital outflows quicken.\n\nPolicymakers have signaled a preference to pause on rate moves for now, even as analysts warn a sharper tightening may be unavoidable to defend the rupee. In a speech at Princeton on April 18, RBI deputy governor Sanjay Malhotra said policy would rely more on anchoring inflation expectations than blunt demand suppression, a stance that slows the pace of cuts but leaves room for action if the currency weakens further.\n\nThe external backdrop is tough, with the war in Iran and higher oil prices tailing currencies across Asia. The Indian currency has been among Asia's worst performers over the past two years, and remaining patient with rates could backfire if the exchange rate stays under pressure.\n\nObservers say a weaker rupee could be used to shield exporters from punitive US tariffs in 2025, while the RBI has cut policy rates by 125 basis points since December 2024 and pumped nearly 20 trillion rupees into banks—helping liquidity and defense for the rupee.
