In recent months, the depreciation of the Indian rupee has become a widely discussed topic across social media platforms and public discourse. Many commentators and political voices are portraying the rupee’s decline as a sign of a weakening Indian economy. Headlines and posts frequently claim that the rupee has “collapsed” or that India’s economic condition has deteriorated sharply as the exchange rate moves close to ₹90 per US dollar.

However, the economics behind currency movement is far more complex than these narratives suggest. A closer look at data, global conditions, and historical trends shows that the current fall in the rupee is driven primarily by external global factors rather than domestic economic weakness.

Understanding What a Falling Rupee Actually Means

When people say the rupee is falling, it simply means that more rupees are required to buy one US dollar. Earlier, if one dollar could be purchased for ₹80, and now it requires ₹90, the rupee is said to have depreciated. This exchange rate changes daily based on demand and supply in the foreign exchange market.

Within India, consumers transact using rupees. However, when India imports goods from other countries, payments are usually made in foreign currencies, most commonly the US dollar. As global trade is largely dollar-denominated, India must convert rupees into dollars for imports. When demand for dollars rises, the rupee weakens.

Why the Rupee Is Falling Today: External Factors at Play

The prevailing narrative that the rupee is falling due to India’s internal economic failures does not align with current economic indicators. Instead, the depreciation is largely driven by global uncertainties and geopolitical developments.

The world is currently facing multiple armed conflicts, heightened geopolitical tensions, and policy uncertainty. US President Donald Trump’s decision to impose tariffs on several countries, including a 50 percent tariff on Indian goods, has unsettled global markets. Such actions have increased risk aversion among international investors.

As a result, foreign institutional investors have been withdrawing funds from emerging markets like India and reallocating capital to perceived safe havens, particularly the United States. So far this year, foreign investors have withdrawn more than ₹1,500 crore from Indian markets.

When foreign investors exit India, they sell assets priced in rupees and convert the proceeds into dollars. This raises the demand for dollars and puts downward pressure on the rupee.

Rising Gold Imports and Trade Deficit Pressures

Another major factor contributing to the rupee’s weakness is the surge in gold imports. In times of global uncertainty, investors traditionally turn to gold as a safe asset. With conflicts ongoing worldwide, demand for gold has increased sharply.

In October alone, India’s gold imports tripled compared to the same period last year, reaching approximately ₹1.32 lakh crore. Increased imports widen the trade deficit, requiring more dollars for payments, which further weakens the rupee.

How Today’s Scenario Differs from the UPA Era

During the UPA government years, the rupee’s depreciation was driven largely by internal economic weaknesses. India’s GDP growth rate had fallen to around 5 percent, inflation was high at approximately 8.5 percent, and the economy ranked tenth globally. At that time, India was included in the so-called “Fragile Five” economies, alongside Brazil, Indonesia, South Africa, and Turkey, due to concerns about economic stability.

In contrast, today’s macroeconomic indicators tell a very different story. India’s GDP growth rate stands at 8.2 percent in the second quarter, making it the fourth-largest economy globally. Retail inflation has dropped dramatically, falling to 0.25 percent in October and 0.71 percent in November. International institutions and global media now refer to India as a “bright spot” in the global economy rather than a fragile one.

Foreign Exchange Reserves Show Economic Strength

One of the strongest indicators of India’s economic resilience is its foreign exchange reserves. In March 2014, the Reserve Bank of India held approximately $304 billion in reserves. By 2025, this figure has risen to nearly $700 billion.

Similarly, India’s gold reserves have expanded significantly. In 2013–14, gold reserves were valued at around $15 billion. Today, they exceed $105 billion. These numbers demonstrate that India has a strong buffer against external shocks, even during periods of global turmoil.

Impact of a Weak Rupee: Costs and Benefits

A depreciating rupee does have negative effects. Importers face higher costs as they must pay more rupees for the same amount of dollars. Students studying abroad, tourists traveling overseas, and companies servicing foreign currency loans all experience increased expenses. The cost of external debt rises, and the trade deficit can widen.

However, the rupee’s weakness also brings advantages. Exporters benefit because they earn dollars, which convert into more rupees. Indian IT companies with significant overseas revenue see higher earnings in rupee terms. Additionally, Indian goods become cheaper for foreign buyers, potentially boosting exports. In the context of US tariffs, increased competitiveness in other global markets could partially offset trade pressures.

Comparing Rupee Depreciation Across Governments

Historical data shows that currency depreciation is not unique to any one government. On May 22, 2004, when the UPA came to power, the exchange rate was ₹45 per dollar. By August 2013, it had weakened to ₹68.75, marking a maximum depreciation of 52.77 percent.

When the NDA government assumed office on May 26, 2014, the dollar stood at ₹59. Today, it is around ₹90.56, representing a maximum depreciation of 53.49 percent. However, when comparing equal 10-year periods, the picture changes significantly. During the UPA’s 10-year rule, the rupee depreciated by about 52.77 percent. During the NDA’s first 10 years, depreciation was limited to approximately 41.92 percent.

Long-Term Perspective: 51 Years of Rupee Movement

A longer historical analysis further weakens claims of exceptional decline. Between 1974 and 1984, the rupee depreciated by about 40 percent. Between 1984 and 1994, it weakened by a staggering 176 percent during a period of political instability and economic transition. From 1994 to 2004, depreciation was around 44.5 percent. Between 2004 and 2014, it reached approximately 52 percent. From 2014 to 2024, the rupee weakened by about 41 percent, which is lower than many earlier periods.

This historical trend highlights that currency depreciation has been a recurring phenomenon across decades and governments, influenced heavily by global integration and external shocks.

Outlook and Global Assessments

Despite current pressures, India continues to be one of the fastest-growing major economies in the world. The country also navigated the severe economic disruption caused by the COVID-19 pandemic better than many peers. According to a recent Bank of America report, the rupee is expected to regain strength in the coming year as global conditions stabilize.

Conclusion

The current depreciation of the Indian rupee is not a reflection of domestic economic collapse but a consequence of global uncertainty, geopolitical conflicts, shifting capital flows, and heightened demand for safe assets. India’s strong growth, low inflation, rising foreign exchange reserves, and improving global standing indicate resilience rather than fragility. A nuanced understanding of currency movements is essential before drawing conclusions about the health of the economy.