The Falling Indian Rupee: Latest Updates, Causes, and Historical Comparisons
The Indian rupee (INR) has experienced a significant decline in value in 2025, reaching record lows against the US dollar and other major global currencies. As of late September 2025, the rupee is trading near ₹88.7 per US dollar, sparking widespread discussions about the impact of domestic and international factors on the currency’s health. This blog delves into the latest developments, reasons behind this depreciation, and places the current trend in historical context, comparing the rupee’s performance with major currencies since 1990.
Latest Situation: Indian Rupee Hits New Lows in 2025
In the recent months of 2025, the rupee has weakened sharply, falling about 6% over the past year. This steady depreciation has increased the cost of imports, added inflationary pressures, and stressed India’s foreign exchange reserves. Market uncertainty remains heightened due to a confluence of domestic economic challenges and global trends, prompting cautious sentiments among investors and businesses.
Key Reasons for the Indian Rupee’s Decline
Several intertwined factors have fueled the rupee’s plunge:
- US Tariffs on Indian Goods: In August 2025, the US imposed a 50% tariff on various Indian exports, significantly hurting India’s trade competitiveness. The tariffs lowered export revenues and contributed to widening the trade deficit.
- Tighter US Visa Policies: Changes in the H1B and B1 visa regulations have restricted the entry of Indian professionals and business travelers into the US. This reduced mobility affects the service sector, particularly IT exports, and decreases remittance inflows, a crucial source of foreign exchange.
- Capital Outflows: Rising US interest rates have attracted global capital away from emerging markets like India, reducing foreign investment and causing currency outflows.
- Widening Trade Deficit: India’s large import bill, mainly driven by crude oil and gold imports, surpasses export earnings, further stressing the demand for foreign currency and weakening the rupee.
- Reduced RBI Intervention: The Reserve Bank of India has limited its direct intervention in currency markets, leaving the rupee to market forces and increasing volatility.
- Global Factors: Elevated oil prices, geopolitical tensions, and a stronger US dollar globally have compounded pressures on the rupee’s value.
Internal and Other External Factors
- Inflation and Fiscal Deficit: Rising domestic inflation and a widening fiscal deficit reduce investor confidence and erode the rupee’s purchasing power.
- Sluggish Export Growth and Policy Uncertainty: Slow export growth combined with regulatory unpredictability discourages foreign capital inflows.
- Global Economic Slowdown: Reduced demand from large trading partners like Europe and China dampens export prospects and weakens the rupee.
- Geopolitical Risks: Regional conflicts and global market disruptions increase risk aversion, leading to capital flight from emerging economies.
Historical Comparison: Indian Rupee vs. Major Currencies (1990 – 2025)
To understand the gravity of the current depreciation, it’s insightful to compare the rupee’s value and that of other key currencies over the past three and a half decades.
| Year | USD/INR | EUR/INR | GBP/INR | JPY/INR |
| 1990 | 17.5 | 24.93 | 28.95 | 0.12 |
| 2000 | 44.31 | 45.32 | 67.47 | 0.41 |
| 2010 | 46.02 | 60.59 | 71.43 | 0.54 |
| 2020 | 74.31 | 84.64 | 98.34 | 0.69 |
| 2025 | 88.72 | 91.01 | 108.25 | 0.60 |
*Values represent how many Indian rupees equal one unit of the foreign currency.
Over this period, the rupee has weakened close to fivefold against the US dollar. The euro and British pound have also appreciated significantly compared to the rupee since the early 1990s. The Japanese yen showed gradual depreciation but at a slower pace relative to the rupee.
Putting the Decline in Perspective
Back in 1990, India faced a balance of payments crisis, with the rupee at ₹17.5 per dollar, leading to major economic reforms and the start of a liberalization process. Today’s depreciation to nearly ₹89 per dollar reflects ongoing trade imbalances, inflationary pressures, and global economic dynamics rather than a crisis of similar magnitude. However, the impact on import costs, inflation, and investor confidence is deeply felt.
Impact of US Tariffs and Visa Regulations
The US’s imposition of steep tariffs on Indian exports has sharply reduced export competitiveness, resulting in a declining inflow of foreign currency. Simultaneously, stringent H1B and B1 visa rules restrict Indian professionals, hurting service exports and remittance inflows. These factors collectively reduce the dollars India earns, contributing further to the current account deficit and rupee weakne
“The Future of the Indian Rupee”
The Indian rupee’s fall in 2025 is the product of a complex mix of external shocks and internal challenges. While global factors like US monetary policy, oil prices, and geopolitical tensions exert pressure, domestic issues like inflation, fiscal deficits, and slow export growth magnify vulnerabilities. The US tariffs and visa tightening add another layer of challenge by constraining India’s trade and services sectors.
Going forward, India’s economic stability will depend on strategic fiscal management, accelerating export diversification, improving ease of doing business, and engaging in effective diplomacy to ease external pressures. Stabilizing the rupee is essential not only for trade and investment but also for protecting the purchasing power of millions of Indians. Understanding this multifaceted challenge is key to navigating India’s economic future.