Is the Falling Rupee a Cause for Alarm?

Falling rupee Dec 2025: Hits below ₹90/$. Causes, benefits for exports, import risks, RBI stance & why experts say no alarm. Latest Indian currency depreciation explained.

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As of December 13, 2025, the Indian rupee has breached the ₹90 per US dollar mark, raising eyebrows among investors and households alike. Headlines scream currency crisis, but economists and analysts argue it’s far from a cause for alarm. Driven largely by global factors and portfolio shifts rather than domestic weakness, the depreciation offers both opportunities and manageable challenges.

Why Is the Rupee Falling in Late 2025?

Several interconnected factors are at play:

Widening Trade Deficit: Import growth (crude oil, electronics, fertilisers) continues to outpace exports amid sluggish global demand.
FPI Outflows: Foreign portfolio investors are booking profits from India’s high-valued equity markets and chasing better returns elsewhere.
Strong US Dollar: Global strength in the dollar is pressuring all emerging market currencies.
Policy Uncertainty: Lingering concerns over India-US trade and tariff agreements have dented sentiment.
Limited RBI Action: The Reserve Bank of India has intervened sparingly, allowing market forces to prevail while preventing sharp volatility.

Foreign exchange reserves remain comfortable at around 11 months of import cover.

Does a Weak Rupee Mean a Weak Economy?

No. India’s macroeconomic fundamentals stay solid:

Robust GDP growth trajectory.
Moderate and controlled inflation.
Ongoing fiscal consolidation with strong capital expenditure.
Healthy external buffers.

The current slide is described as transient and sentiment-driven, not a sign of structural cracks.

Benefits of Rupee Depreciation

A weaker currency isn’t all bad – it provides clear advantages:

Benefit	Explanation
Export Boost	Indian goods & services become more competitive globally
IT & Services Gains	Higher rupee earnings for dollar-based revenues; potential bonus hikes
Tariff Offset	Helps counter recent US trade policy disadvantages
Low Inflation Impact	Every 5% depreciation adds only 0.3–0.4% to CPI

Sectors like IT, pharmaceuticals, and textiles stand to gain significantly.

Downsides & Risks of Falling Rupee

Challenges cannot be ignored:

Risk	Impact
Higher Import Costs	Expensive crude oil, electronics, machinery & fertilisers
Fiscal Pressure	Larger subsidy bills for fuel and fertilisers
Imported Inflation	Gradual pass-through to consumer prices
Business Uncertainty	Volatility affects hedging and long-term planning
Corporate Debt Burden	Companies with dollar loans face higher repayment costs

Persistent weakness could widen the current account deficit further.

RBI’s Balanced Approach

The central bank continues its policy of intervening only to smooth excessive volatility, avoiding aggressive defence of any specific level. This managed float helps maintain competitiveness without draining reserves unnecessarily.

Way Forward: Structural Steps Needed

To build long-term resilience:

Diversify and upgrade exports toward high-value manufacturing.
Attract stable FDI through policy consistency and ease of doing business.
Reduce import dependence via Atmanirbhar initiatives (semiconductors, defence, renewables).
Expand renewable energy to lower oil import bills.
Encourage hedging instruments, especially for MSMEs.
Fast-track trade agreements and improve communication to boost confidence.

Conclusion: Monitor Closely, But No Need for Alarm

The rupee’s fall below ₹90 in December 2025 reflects short-term global pressures and investor repositioning more than fundamental weakness. With strong growth, adequate reserves, and prudent policy management, India’s external position remains resilient.

A weaker rupee brings export opportunities while import challenges are manageable. The real focus should be on structural reforms to reduce vulnerabilities – not panic over temporary currency movements.