The following is the detailed analysis of the Editorial titled “Limited room: On the Indian rupee” published in ‘The Hindu‘ newspaper on November 27, 2025.
Link to the original Editorial – https://www.thehindu.com/opinion/editorial/limited-room-on-the-indian-rupee/article70326823.ece
Limited room: On the Indian rupee [Analysis]
Specter of a Falling Rupee Unsettles India
Surging oil import costs contribute to rupee’s weakness, so oil imports must be aggressively reduced both in value and volume
At present, a dollar can be bought for Rs.89.2. Just a year ago, in November 2024, this figure was Rs.83.4. It amounts 7% fall of the value of rupee vis-à-vis the dollar. It needs to be mentioned here that in the year 2018, rupee’s fall was an alarming 11 -12%.
President Trump’s coming to power in 2018 caused some geopolitical disturbances that hit India too. His loud prioritizing of U.S.’s national interests triggered a spike in dollar’s value. The other contributing factor behind the dollar’s rise was the increase in FED’s interest rates. As the dollar strengthened, rupee fell alarmingly by 11-12%.
The Reserve Bank of India stepped in to arrest the fall of the rupee by going in for a currency swap (dollar vs. rupee) arrangement of $5 billion in the year 2019. In February 2025, RBI mobilized another $10 billion through a similar swap. Such swaps are made by most central banks around the world to stabilize their currencies when the need arises.
There are several factors that have pushed the rupee so alarmingly down in November. Soaring gold imports, plummeting exports, costly crude oil / LNG imports, and increasing anxiety among export houses have widened the current account deficit. President Trump’s tariff increases, and his loose-mouthed threats have upended global trade visibly. India is one among the worst sufferers of Trump’s attempt to curb imports into the U.S.
When the global trade scenario is in a state of turmoil, RBI’s elbow room to arrest the fall of Rupee becomes narrower. RBI can only arrest the rate of slide but can’t stave it off altogether. In the last 12 months, since November 2024, RBI has pumped in a total of $50 billion into the Forex market to prevent a quick slide of Rupee’s exchange rate. It’s not a big amount considering the fact that India’s Forex reserves stand at $693 billion. The government and the RBI have a lot of options to act, given the fact that the Consumer Price Index (CPI) has fallen to a low 0.24% against the target of 2 to 6% set by RBI earlier.
In the import front, India has to contend with two adverse factors. To placate Trump, India has to quickly curtail buying of relatively cheaper Russian crude oil, and import the costlier LNG and crude from the U.S. Such a shift pushes up the import bill. This apart, India’s crude oil imports is gradually increasing year by year thanks to its expanding economy. In such a situation, the looming cloud of soaring current account deficit can’t be wished away.
To curtail crude oil imports, India must curb its consumption. Motor vehicles need petrol and diesel. Aggressive switch over to electric vehicles will help in limiting the demand for petrol and diesel. If this strategy gains traction, volumes of crude oil imports will remain stagnant, if not fall.
Another development apparently is going to widen the current account deficit. Recently India has signed trade deals with the ASEAN, Japan, and UAE intended to spur exports, but the deals will also increase imports. The net effect will be negative for India’s current account position. Some more prudence should have been adopted in finalizing such agreements.