New Delhi. The movement of the Indian rupee in the last 20 years has not been a straight line. This journey has been full of ups and downs, sudden shocks, intermittent recoveries and long periods of decline. While in 2005, 1 US dollar was around 44 rupees, by the end of 2025 the rupee will cross 90. This change is not just the currency market data, but behind it lies the entire story of India’s economic structure, global events, capital flows and policy decisions. This period shows that the rupee did not fall due to any one reason, but every major global crisis, dollar strength and domestic imbalance together weakened it. At some places there was a sharp decline, at some places there was some relief, but in the long run the trend remained downwards.
The period from 2005 to 2007 is considered to be the strongest for the Indian rupee. At this time India’s economic growth was around 8 percent. IT and service sectors were growing rapidly. Foreign investors were seeing India as an emerging power. Strong inflow of FDI and FPI was increasing the supply of dollars in the market. Due to this, the rupee continued to strengthen and in 2007, 1 dollar came to around 41 to 42 rupees. This was the same period when there was an environment of risk taking in the global market and money was flowing rapidly into the emerging economies. According to the real effective exchange rate, this time is also considered to be the peak strength of the rupee.
2008
Things changed suddenly in 2008. After the crash of Lehman Brothers in America, the Global Financial Crisis spread all over the world. Investors started withdrawing money from emerging markets to avoid risk.
FII outflow increased and demand for dollars suddenly increased. The result was that the rupee slipped rapidly to around Rs 50. This was the first big shock, which made it clear how sensitive a currency like rupee can be at a time of global crisis.
2009 to 2011
When the global economy gradually started recovering after the crisis, capital flows started returning to India also. Growth improved and market sentiment improved. Its effect was also visible on the rupee. Between 2009 and 2011, the rupee again started trading at the mid-40 level. Although it did not reach the strength of 2007, it was a clear indication that the rupee can recover in the right global environment.
2012 and 2013
2012 and 2013 are considered to be one of the most important turning points in the history of rupee. During this period, India’s current account deficit was increasing. The fiscal deficit was high and the import bill, especially crude oil and gold, remained under pressure. Meanwhile, the US central bank Federal Reserve indicated to reduce bond purchases, which was called taper talk. After this announcement, capital started flowing out of emerging markets rapidly. The result was that within a few months the rupee slipped from 55 to 60 and then reached around 68. This period of 2013 is considered a big turning point for the rupee, because after this the base level of the currency shifted upward.
2014 to 2019
After 2014, the situation stabilized to some extent. The government and the Reserve Bank focused on controlling the current account deficit and increasing forex reserves. The effect of this was that the rupee mostly remained in the range of 60 to 70. However, even during this period there was not complete peace. Volatility in the rupee remained due to fluctuations in crude oil prices, trade war between America and China and sudden changes in FII flows. In 2018 and 2019, when crude oil went above $80 and there was a sell-off in emerging markets, the rupee weakened to around 74.
2020
In 2020, the Covid pandemic shook the economy of the entire world. Due to lockdown in India, growth shock and panic in the global market, investors started withdrawing money. During this period the rupee went in the range of 75 to 77. However, after this, some stability came due to the active role of the Reserve Bank, return of liquidity and risk sentiment of global central banks.
2022 to 2025
The period after 2022 again proved to be difficult for the rupee. The Russia-Ukraine war, commodity shocks, especially the rise in oil and gas prices, and persistently high interest rates in the US made the dollar extremely strong. The strengthening of the dollar index had an impact on almost all emerging currencies and the rupee was also not untouched by it. In 2023 and 2024, the rupee weakened in the range of 82 to 85 and in 2025 it reached the record low zone i.e. 88 to 91 rupees per dollar.
When was the rupee strongest
If we look at the entire period from 2005 to 2025, the biggest strengthening of the rupee was seen around 2007 and 2008. At that time 1 dollar was equal to about 41 to 43 rupees. High growth, boom in IT services exports, strong capital inflow and global risk on environment had supported the rupee. In terms of real effective exchange rate, that time was much stronger than today.
Why did the rupee keep falling?
There have been many reasons behind the long-term decline of the rupee.
- The biggest reason is the difference in inflation. Inflation in India has been higher than America and other developed countries for a long time. Its effect is that the purchasing power of the rupee weakens in the long term.
- The second major reason is current account deficit. When imports, especially oil and gold, are high and exports do not grow as fast, demand for the dollar increases and the rupee comes under pressure.
- The third reason is dependence on capital flow. Indian markets are very sensitive to FII flows. As global sentiment deteriorates, money flows out and the rupee weakens.
- Apart from this, strong dollar cycle has also been an important reason. US interest rates remained high after 2014, and especially between 2022 and 2025, which strengthened the dollar and put pressure on emerging market currencies.
How does it affect the common people and the economy?
The effects of a weak rupee are both positive and negative, but the negative impact is felt more in the short term.
- Imports become expensive. Crude oil, gas, electronics and medical equipment are purchased in dollars, due to which the price of petrol diesel, transport and manufacturing costs increase. This has a direct impact on inflation.
- Foreign travel and studies also become expensive. Tickets, tuition fees and hotel expenses increase in rupee terms, which directly burdens the middle class.
- A weak rupee is theoretically good for exports, but if imported inputs become expensive then the net benefit remains limited. For companies that have debt in dollars, interest and repayment costs increase, which puts pressure on the balance sheet.
What do the government and the Reserve Bank do?
To stop the sharp fall in the rupee, the Reserve Bank of India and the government take several steps.
- RBI intervenes in the forex market and sells dollars so that the supply in the market increases and panic does not spread.
- When necessary, interest rates and system liquidity are tightened, as was seen in 2013.
- To increase dollar inflow, steps like FCNR B deposit, NRI scheme and relaxation in external borrowings are taken.
- The government also tries to reduce pressure on the rupee in the long term by fiscal deficit control, PLI scheme and promoting manufacturing.
