Earlier this week, the Indian Rupee (INR) breached the psychological barrier of 91 against the U.S. Dollar (USD), fuelling speculation that it may hit the 100-mark as trade uncertainties continue. However, experts are divided over whether the sudden depreciation of the rupee is a “matter of concern”.
“Yes it is a big concern, as it makes harder for the country to achieve its income growth target with a leaking rupee. For the markets, it reduces the ability to attract overseas capital when the market returns moderate on a higher base. It also pushes a lot of domestic wealth looking at dollar assets through the liberalised remittance scheme (LRS), or gold, the only non LRS dollar asset,” said Ajay Garg, MD, Equirus Capital.
“A depreciated rupee also reduces the overall capital available for the economy, which is still at a higher stage of growth, making capital more expensive and therefore adding to the continued capital cost structure for the country,” Mr. Garg said.
However, Abhishek Bisen, Sr. EVP and Fund Manager – Fixed Income, Kotak Mutual Fund believes otherwise.
“No, the rupee’s recent depreciation isn’t considered a cause for alarm as it is largely triggered by tariffs and driven by external forces like global market volatility. India’s macroeconomic fundamentals remain robust [ample forex reserves, a manageable current account deficit, and strong GDP growth rate],” Mr. Bisen said.
“This decline shall be seen as an aberration and more of an opportunity to come into the Indian capital markets as IGB has become 6% cheaper [equal to depreciation of INR] keeping other factors unchanged. Had it been due to domestic factors then it would have been a concern,” Mr. Bisen added.
According to Mr. Garg, the rupee is depreciating as India continues to have a large current account deficit (CAD) and that puts pressure on the rupee. “This gets accentuated with capital flows and therefore we have had this constant depreciation,” he said.
Given the fact that the Trump administration is imposing one of the highest tariffs of 50% on India, the rupee experienced one of the highest negative impact, while other major currencies became relatively stronger, which eventually implies that the rupee had also depreciated against major currencies like euro, yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, Mr. Bisen said.
To a question on the argument that a depreciating rupee is good for exporters and it’s a natural phenomenon, Mr. Garg said, “In my mind it reflects helplessness and it is like clutching to some perceived positive.”
“At best this is a myth, because none of the Indian exports come with pricing power like Apple’s iPhone or Microsoft products. Most of our exports are B2B in nature, where the buyer sits with your rupee-based costing structure to negotiate. Also, one of the largest exporters is China and they have achieved this surpluses on constant currency,” Mr. Garg said.
Stating that the country’s export basket had changed significantly, he said, “We are doing more value-added exports vis a vis engineering products, speciality chemicals, pharmaceutical, and electronics, and a lot of these sectors have reasonable level of import components in their value chain. A depreciating rupee makes import expensive and actually reduces export competitiveness too. “
On the outlook for the Rupee, Mr. Bisen said, “We expect India-U.S. trade deal to be finalised in early 2026. Additionally, we expect improved capital flows in the coming year and consequently, the rupee will relatively appreciate or fall below ₹90 mark against the greenback.”
But assuming a 2-3% annual depreciation, the rupee should remain under pressure, Mr. Garg said, adding, “On a lighter note, one remembers Chetan Chauhan, who got out on 90s and never scored a century, I just hope the rupee emulates the same.”
Published – December 20, 2025 08:22 pm IST
