By: Bharat Daily Samachar Date: 25 Sep,2025

The Indian Rupee’s Steep Decline: A Look Back

Since 2014, the Indian Rupee (INR) has experienced a gradual but significant decline against the US Dollar (USD). In May 2014, the rupee was valued at approximately ₹58.5 per USD, whereas in September 2025, it touched ₹88.6 per USD, marking a depreciation of nearly 30% over 11 years.

This prolonged weakening has raised questions about the resilience of the Indian currency in the face of global and domestic challenges. For businesses engaged in imports, consumers purchasing foreign goods, and investors with exposure to global markets, this depreciation has far-reaching implications.

Key Factors Behind the Rupee’s Weakening

1. Strengthening of the US Dollar

One of the most significant reasons for the rupee’s fall has been the appreciation of the US Dollar. Over the years, the US economy has witnessed higher growth and rising interest rates, making the dollar more attractive to global investors. When the dollar strengthens, emerging market currencies like the INR often face downward pressure, as investors move capital toward higher-yielding dollar-denominated assets.

2. Capital Outflows and Investment Shifts

Foreign Portfolio Investment (FPI) flows into India have been volatile in recent years. During periods of global uncertainty or rising US interest rates, FPIs often withdraw investments from Indian equities and bonds, reducing demand for the rupee. For instance, in the first quarter of 2025, FPIs reportedly pulled out over ₹61,000 crore ($7.3 billion) from Indian markets. This capital flight increases demand for foreign currency, leading to rupee depreciation.

3. Rising Trade Deficit

India’s trade deficit—where imports exceed exports—has also contributed to the rupee’s slide. As the country imports goods such as crude oil, electronics, and machinery, it needs more foreign currency to pay international suppliers. A sustained trade deficit places downward pressure on the rupee, especially when exports fail to rise at the same pace.

4. Inflationary Pressures

Higher domestic inflation erodes the purchasing power of the rupee. When inflation outpaces other countries, the relative value of the currency declines. Additionally, inflation can discourage foreign investment in the country, reducing demand for the rupee and further weakening it against the dollar.

5. Geopolitical and Global Market Volatility

Global uncertainties, including geopolitical tensions, oil price fluctuations, and international financial market volatility, have influenced currency movements. Investors tend to favor safe-haven assets like the US Dollar during periods of uncertainty, which can exacerbate the rupee’s decline.

Implications for Businesses, Investors, and Consumers

Businesses

For import-dependent companies, a weaker rupee increases costs of imported raw materials, machinery, and technology. Conversely, exporters may benefit as Indian goods become cheaper in foreign markets, potentially boosting competitiveness abroad. Companies need to carefully manage currency risk to protect profit margins.

Investors

Currency fluctuations impact both domestic and foreign investors. Those holding assets in foreign currencies may see returns influenced by rupee depreciation. Likewise, foreign investors in India must consider exchange rate risks when investing in equities or bonds.

Consumers

Consumers face higher prices for imported goods, foreign travel, and international education fees. Everyday expenses may rise indirectly due to costlier imported products, affecting household budgets and purchasing power.

Current Trends and Future Outlook

As of September 2025, the rupee has hit an all-time low of ₹88.6 per USD, sparking concerns about further depreciation. Analysts suggest that near-term pressures may persist due to:

• Continued foreign capital outflows

• Ongoing global economic uncertainty

• Rising US interest rates

However, the long-term outlook for the rupee may improve if India achieves:

• Greater foreign direct investment (FDI) inflows

• Controlled inflation and stable economic growth

• Improved trade balance with higher exports and reduced imports

Effective monetary policy by the Reserve Bank of India (RBI), coupled with fiscal reforms and external economic stability, could help stabilize the currency over time.

What Can Stakeholders Do?

• Businesses should hedge currency risk using forward contracts or other financial instruments.

• Investors need to monitor global interest rates and FPI trends to make informed decisions.

• Consumers should plan for rising costs on imported goods and international expenses.

Conclusion

The Indian Rupee’s nearly 30% depreciation since 2014 reflects a complex interplay of global and domestic factors, including US dollar strength, capital flows, trade imbalances, and inflationary pressures. While short-term challenges remain, careful policy measures and a stronger economic foundation can support a more stable rupee in the years ahead.

For India’s businesses, investors, and consumers, understanding these dynamics is critical to navigating the currency market and planning for the future. The rupee’s journey is a reminder of the interconnectedness of domestic and global economic forces in shaping financial realities.