The rupee’s fall past 90 reflects a strong US dollar, FPI outflows and a widening trade deficit. While it raises imported inflation and debt costs, it aids exports like IT and pharma. The RBI follows a managed float, using forex reserves to limit volatility and maintain economic stability.
Click to View MoreA weaker rupee may boost export prices in the short run, but India’s long-term trade gains depend more on productivity, innovation, infrastructure and skilled labour. While depreciation can temporarily ease the trade gap, it also raises import costs, fuels inflation and risks capital flight in an import-dependent economy. Sustainable competitiveness therefore lies in strengthening real economic capabilities, supported by targeted policy measures such as incentives for exporters, attracting dollar inflows and stabilising forex markets.
Click to View MoreThe RBI’s 25 bps repo rate cut to 5.25% reflects confidence in low inflation and strong growth, aiming to boost borrowing, investment and consumption through cheaper credit. While it supports economic momentum, risks persist due to rupee weakness and uncertain external conditions, making cautious monetary calibration essential.
Click to View MoreRupee depreciation refers to the fall in the value of the Indian rupee against other currencies, primarily driven by market forces such as high import demand, capital outflows, and global dollar strength. While it poses challenges like higher import costs, inflation, and increased foreign debt burden, it can also boost exports, attract foreign investment, and increase remittance value. Institutional interventions by the RBI, Government, SEBI, and export agencies aim to manage volatility, maintain investor confidence, and strengthen long-term economic fundamentals, ensuring that currency movements reflect real economic strength rather than short-term pressures.
Click to View More
© 2025 iasgyan. All right reserved