Rupee Hits 90: Why Is The Currency Sliding?

The Indian rupee breached an important psychological barrier on Dec 3, 2025. For the first time in history, it has crossed the 90-per-US dollar mark.

On Wednesday, Dec 3, the domestic currency weakened to an unprecedented low of 90.13 against the US dollar. This decline crossed its previous record of 89.9475 set just a day earlier on Dec 2.

The decline below the psychological mark has marked a depreciation of close to 5% since the beginning of 2025. This has made the rupee one of Asia's worst-performing currencies in 2025.

The slide has come amidst a perfect storm of economic headwinds.

• FPIs (Foreign Portfolio Investors) have continued their aggressive selling spree. They have offloaded shares worth ₹4,335 Cr in just the first two days of Dec 2025. The total outflows for the year stand at ₹1.48 lakh Cr.

• India's trade deficit has ballooned to a record $41.7 bn in Oct 2025. The rise of gold imports and a sharp contraction in exports to the US have led to the rise in deficit.

The breach of the psychological barrier has pushed the Indian rupee to enter uncharted territory. Now, there is a critical question for every Indian. Is this a temporary dip or the new normal that will reshape household budgets and investment portfolios?

Why Is The Rupee Falling So Fast?

The rupee's descent has resulted from a convergence of global and domestic pressures. There are three main reasons that have led to this decline.

Relentless Exit of Foreign Capital: The global funds are pulling money out of Indian equities. They are reallocating to markets that they consider to have more attractive valuations or lower geopolitical risk. When they exit, INR is sold and USD is bought to repatriate their funds. This process has put significant pressure on the rupee.

India-US Trade Relationship Uncertainty: There is an uncertainty surrounding the India-US trade relationship. Steep tariffs were imposed by the US administration earlier this year. This has rattled market sentiment. There is also a possibility of further widening India’s trade deficit. This has led to the rupee’s speculative selling.

The RBI Strategy: The RBI (Reserve Bank of India) might be strategically allowing the rupee to weaken. Analysts have suggested that RBI might have permitted the rupee depreciation to help exporters remain competitive in the face of rising US tariffs. With this move, the RBI might be hoping to correct the trade imbalance naturally, rather than burning through its forex reserves to defend a specific level.

But while exporters might cheer, is there a cost to be paid by the general public?

The "90 Effect": Winners And Losers

A falling rupee can be a double-edged sword that can cut through the economy in complex ways.

For the Average Consumer: The value of a currency is directly connected to inflation. India’s major import basket includes crude oil, edible oil, and electronics. These commodities will now cost more. The higher crude oil prices can also lead to higher petrol prices, and consequently, the prices of essential goods and groceries would increase. The annual cost of education for students studying abroad would also increase as a consequence.

For Exporters: Sectors like IT, pharmaceuticals, and textiles might gain from the falling rupee. These companies earn revenue in dollars but incur costs in rupees. Thus, a weaker currency can boost their profit margins and make their products more competitive globally.

For the Government: The government could face a mixed bag. A weaker rupee can bloat the import bill and widen the CAD (Current Account Deficit) and fiscal deficit. It can also make servicing foreign debt more expensive. Conversely, it can boost customs duty collections in rupee terms.

The NRIs (Non-Resident Indians) can also benefit, as their foreign currency remittances yield more rupees back home. With these conflicting interests at play, what is the likely path forward for the currency?

All Eyes On RBI

The market's attention is now squarely fixed on the RBI's MPC (Monetary Policy Committee) meeting scheduled for Dec 5.

The RBI has adequate reserves to curb extreme volatility. However, experts believe that RBI may not aggressively defend the 90 level if fundamental global shifts are driving the depreciation. There is a consensus that the currency will eventually stabilise once clarity emerges on the US trade deal.

Sources:

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