The Indian rupee’s drop past ₹90 per US dollar on December 3 has sparked widespread concern, yet SBI Research maintains this is not a currency crisis. Instead, the depreciation reflects a mix of global pressures and a conscious shift in the Reserve Bank of India’s exchange-rate strategy.
According to SBI, the rupee’s move from 85 to 90 in less than a year represents the second-fastest five-rupee fall since the taper tantrum. Even so, the bank describes the trend as a “sliding rupee, not a weak rupee,” noting that India’s macroeconomic fundamentals and volatility levels remain stable.
One of the biggest triggers was the US tariff hike announced on April 2, 2025, which placed a steep 50% tariff burdenon Indian exports. This is significantly higher than the tariffs applied to China, Vietnam, Indonesia, or Japan. As a result, nearly $45 billion worth of Indian, largely labour-intensive, exports came under strain. The rupee subsequently became one of the most depreciated major currencies, losing 5.5% against the dollar since April.
Foreign portfolio activity compounded the pressure. Veteran banker Uday Kotak attributes the sharp fall to heavy selling by FPIs and private equity funds routed through FDI channels, which created extraordinary demand for dollars.
Meanwhile, the RBI has shifted to a more restrained, hands-off currency policy. Rather than defending specific exchange-rate levels, the central bank focused only on curbing excess volatility, selling an estimated $30 billion between June and October.
SBI Research also highlights that India’s real and nominal effective exchange rates now show the rupee as undervalued, a factor that could support export competitiveness.
Adding a structural view, Nilesh Shah of Kotak AMC argues that the rupee’s long-term direction is inherently downward due to India’s inflation differential and productivity gap. “The destiny of the rupee is to depreciate,” he says.
Taken together, the rupee’s fall to 90 is driven by tariff shocks, capital outflows, and a recalibrated RBI strategy. It reflects global headwinds—not the onset of a crisis.
