USD vs INR: The Indian rupee hit a historic low, crossing ₹91 per US dollar for the first time on Tuesday, December 16. It slipped to 91.14 before recovering slightly to 90.18/$ on Thursday, December 19. What makes this decline unusual is that the Reserve Bank of India (RBI) is not stepping in to arrest the fall.
RBI’s new strategy: Weak rupee as a policy tool
Traditionally, a falling rupee would trigger immediate RBI intervention. Dollars would be sold to support the rupee and curb volatility. This time, however, RBI is staying on the sidelines. Governor Sanjay Malhotra made it clear during the December 5 policy announcement that the central bank will no longer defend a particular exchange rate.
India appears to be moving towards a “crawling peg” approach, letting the rupee depreciate gradually—4-5 per cent a year is now considered normal. Instead of a weak rupee being a problem, it is now seen as a tool to support exports, attract investment, and boost economic growth.
How a weaker rupee helps
Exports get cheaper: Indian goods become more competitive abroad. November exports surged to a record $73.99 billion, aided by the rupee’s fall.
Domestic production rises: Imports become costlier, encouraging companies to manufacture at home. This supports the “Make in India” initiative.
Remittances and rural spending increase: Money sent from abroad holds more value, potentially boosting consumption in villages and smaller towns.
The downside: Inflation for consumers
The flip side is that India imports significant amounts of crude oil, electronics, and other essentials. A weaker rupee makes these imports more expensive, increasing costs for businesses and consumers. Everyday goods could see price rises, even as exports benefit.
What’s next for the rupee
Analysts believe the rupee may touch 91.50 in the near term due to global pressures and foreign fund outflows. However, SBI forecasts a strong rebound in the second half of the next fiscal year, between October 2026 and March 2027, as global uncertainties ease.
Impact on investors and households
For investors: Export-oriented sectors such as IT, pharma, and textiles may benefit, offering potential opportunities in the stock market.
For consumers: Imported goods and commodities could get costlier, so some inflationary pressure is likely to persist.
Key takeaways
India’s approach marks a major shift in currency strategy: it is no longer about maintaining a strong rupee but leveraging a weaker currency to fuel exports and domestic manufacturing. For investors, the move could be a boon for export-heavy sectors, while everyday consumers may feel the pinch of higher import costs.
