In 2025 the Indian rupee became the weakest currency among Asian peers — driven by higher US tariffs, the war crisis in Ukraine, capital outflows and a current account deficit.
Higher US tariffs and the threat of sanctions over purchases of Russian energy and arms triggered a mass exodus of investors from the Indian stock market — estimates point to outflows of about $16.3 billion.
Comparison with 2022
If the trend continues, the rupee could post its worst annual performance since 2022, when the invasion of Ukraine sent oil prices above $100 per barrel. Then, as now, the blow hit India harder, as it imports about 90% of the crude oil it consumes.
Central bank actions
According to Bloomberg Economics estimates, the Reserve Bank of India (RBI) has sold more than $30 billion of foreign-exchange reserves since late July to curb the currency's decline. These interventions helped avoid a new record low in mid-October.
However, on November 21 the rupee fell to 89.48 to the US dollar (as of November 27 — 89.30), indicating a weakening of exchange-rate defence. Experts believe the RBI is partly holding reserves in anticipation of trade talks with Washington.
Economic consequences
Currency weakness has a dual effect: on one hand, it makes Indian goods more competitive abroad and boosts remittances from workers overseas. This can support export sectors and household incomes linked to money transfers.
On the other hand, a weaker exchange rate raises the cost of imports, notably oil, mineral fertilizers and electronics, heightening inflationary risks for the domestic market.
- US sanctions on major Russian oil exporters, which came into effect on November 21, affected the price of the Urals grade for India and caused a record jump in tanker freight rates.
Context
The combination of geopolitical pressure, market fluctuations in the energy sector and central-bank behaviour underlies the current rupee weakness. The further course of events will depend on the outcome of trade talks with the US, energy-price dynamics and the RBI's willingness to spend reserves to stabilise the exchange rate.
