Rupee’s fall from grace: Hit by trade deficits, tariff wars and stronger dollar

The Indian rupee's slide to a record low, crossing Rs 90 to the US dollar on Wednesday morning, marks one of the sharpest currency pressures India has experienced in recent years.

- JAYANTA ROY CHOWDHURY

The fall has not been sudden; it is the result of a confluence of domestic vulnerabilities and global shifts that have collectively battered sentiment and intensified the demand for dollars. At the core of the rupee's weakness lies a ballooning trade deficit. India posted a record merchandise trade deficit of USD 196.82 billion during April-October 2025, an increase of more than USD 25 billion compared to the same period last year. The near USD 200 billion deficit starkly illustrates how rapidly imports are outpacing exports. This widening gap has a direct effect: it forces importers to buy more dollars, tightening the supply of the US currency in domestic markets and pushing the rupee down. India's exports, which were already struggling with sluggish global demand, were dealt a body blow by US President Donald Trump's surprise tariff impositions.

A huge 50 per cent penal tariff was slapped on almost all sectors as "punishment" for India's purchase of Russian crude. India's key export industries ~ such as textiles, gems and jewellery, pharmaceuticals, and chemicals faced new barriers at a time when they could least afford them.