In Focus by The Hindu From firefighting to managed decline: why the RBI let the rupee breach 90
Dec 27, 2025
Zico Dasgupta, an economist specializing in exchange rates and RBI policies, explores the recent breach of the ₹90 mark by the Rupee. He examines how U.S. tariffs and falling exports have worsened India's trade deficit, contributing to forex pressure. The discussion includes rising precious metal imports and significant capital outflows, which have put further strain on the currency. Zico also discusses the RBI's strategy of managed depreciation and questions whether this will actually enhance exports, cautioning about global demand factors.
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Trade Deficit Drives Rupee Pressure
- India's widening trade deficit, worsened after higher US tariffs, is a key driver of the rupee's depreciation.
- Reduced exports cut dollar inflows, raising dollar value relative to the rupee.
Precious Metals And Capital Outflows
- Surging gold and silver imports sharply increased dollar demand and widened the current account gap in Sept–Oct 2025.
- Combined with weak net capital inflows, this created excess foreign exchange demand pushing the rupee down.
Large FPI Outflows Weaken Support
- Foreign portfolio investors withdrew about $17 billion in 2025, marking unusually large FPI outflows.
- This weakened capital account inflows that had previously offset India's persistent trade deficit.