POLICY FAILURE OR STRATEGIC CHOICE?

Record rupee weakness raises questions: structural vulnerability or deliberate strategy to counter US tariffs?

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In recent weeks, the Indian Rupee (INR) has experienced a sharp and volatile depreciation, breaching the psychologically important level of 90 against the US Dollar.

The currency touched a historic intraday low of 91.14 on 16th Dec ‘25. With a year-to-date decline exceeding 6%, the Rupee has emerged as the weakest-performing currency in Asia this year. The pressure is even more pronounced if compared with other major currencies. The INR has weakened by over 17% against the Euro and 8% against Japanese Yen.

In just over 14 years INR has lost almost half of its value with respect to the US Dollar. INR was around ₹47 per USD in 2011. Thereafter, the slide has been relentless from ₹67 to USD in 2016, ₹71 in 2019, ₹82 in 2022, and ₹90 to USD in 2025.

A gradual depreciation of the Rupee against the US Dollar is a longstanding structural feature for the Indian economy, averaging about 3% annually historically. Recent episodes of sharp INR depreciation include the 2018 selloff (8.7% slide), the 2013 “taper tantrum,” (14%) and the global financial crisis of 2008 (18.7%). A weakening Rupee raises important questions about the underlying drivers of the current episode and the appropriate policy response.

It is important to note that a controlled and predictable depreciation of the INR is not completely undesirable. From a policy perspective, a moderately weaker currency supports export competitiveness by making Indian goods cheaper in global markets. It also discourages excessive imports by raising their relative cost, thereby encouraging domestic production and import substitution. These mechanisms can support growth and employment when depreciation occurs in an orderly manner.