This time the rupee fell against the dollar and crossed its historical low. It fell from 90.05 to 90.14. Earlier on December 2, it had closed at 89.96. On December 3, trading started with a fall of 9 paise at 90.05. After all, why is the fall of the rupee being considered more serious and real this time?
This fall of the rupee has stemmed from US tariff policies, huge withdrawal of foreign investors and strong dollar demand. Since July this year, foreign financial investors have withdrawn more than ₹ 1.03 lakh crore from the Indian market. Increase in dollar stocking on imports like oil and gold has also put additional pressure on the rupee.
Question – This fall of rupee is historical but why is it being considered serious?
– This decline is now being called “serious and real”, as the rupee has weakened by 5.16% in 2025. It increased from 85.70 on January 1 to beyond 90. It is being affected by America’s high tariffs of up to 50 percent on exports. Imports are becoming expensive. The current performance of the rupee is ranking it among the worst performing currencies of Asia. Global trade tensions and geopolitical risks have made this serious. The exchange rate of the rupee also weakened against the Euro (102.32 to 103.63), British Pound (116.08 to 118.27) and Japanese Yen (0.5642 to 0.5720) between November 21 and November 28. That means the rupee has fallen against all the four major currencies.
Question – What has been the condition of the rupee in the last 30-35 years, why has the recent decline been so sharp?
– In 1991, one US dollar was equal to 17.50 Indian rupees. It reached around Rs 75 by 2020. It fell to 90.29 on December 3, 2025, which shows a decline of 5-6% in a year. In the year 2025, the rupee will reach 85 to 90 rupees against the dollar. This is a big decline of five rupees in a year.
Question – What impact is the American tariff increase having on the rupee?
– US imposed 50% tariff on India in 2025 – 25% reciprocal and 25% as punishment for buying Russian oil. Due to which Indian textiles, shoes and jewelery became expensive in America. India has been exporting these things the most to America, because they have a big market there. Now it is becoming difficult for Indian goods to survive in competition there. Regarding the trade agreement between India and America, it was expected that it would be done by the end of November, but since it has not been done yet, uncertainty has increased in India-US trade, investors became cautious. The trade deficit could reach $41.7 billion by October 2025.
Question – How is the withdrawal of money by financial investors also weakening the rupee?
– Foreign institutional investors (FIIs) are withdrawing capital from the Indian stock market on a large scale. More than $17 billion has been withdrawn this year. When financial investors i.e. FIIs sell Indian assets, demand for dollars increases, which puts pressure on the rupee. Foreign investors are withdrawing money from the Indian capital market and investing it in the American markets, where interest rates are high.
Question – How is the import and export imbalance contributing to the fall of the rupee?
– India’s trade deficit is at a record high—$41.7 billion in October 2025. Import of oil, gold, silver, metals, electronics became more expensive. Whereas exports were affected by the tariff. More dollars are needed for imports, but less dollars are being received from exports, due to which the demand for dollars increases and the rupee falls.
Question – What will be the impact of the fall of rupee?
– Imports will become expensive. Foreign travels, education and medical treatment abroad will become expensive. Inflation will increase. A sharp decline can harm the economy.
Question – Are all currencies falling against the dollar or is only the rupee more affected?
– No, not at all. Many major and emerging currencies have strengthened against the US dollar, that is, the dollar has weakened in comparison to them, but the Indian currency has weakened. The Swedish Krone strengthened by 9% while the Euro rose by 10.92%. Even the Chinese yuan remained stable or slightly strengthened.
Question – When the rupee falls, how does the Reserve Bank handle it, why is it difficult this time?
– The main focus of RBI is to prevent excessive fluctuations in currency, on such occasions it sells dollars from its foreign exchange reserves so that the supply of dollars increases and the rupee becomes stable. RBI sold $30 billion from June to October to prevent it from crossing the 90 level in early December 2025.
He manages liquidity through dollar-rupee swap. Supports the market by buying and selling bonds through open market operations. RBI plans to inject $2 trillion liquidity in December 2025. But this sharp decline is making the work of the Reserve Bank difficult.
