‘Rupee Will Find Its Own Level,’ Says Nirmala Sitharaman – Meanwhile, It’s ₹87 Per Dollar
Feb 26, 2025, 23:29 IST
( Image credit : Times Life Bureau )
The Indian rupee has depreciated to ₹87 per U.S. dollar, raising concerns about its economic impact. Finance Minister Nirmala Sitharaman previously stated that the "rupee will find its own value," emphasizing a hands-off approach by the Reserve Bank of India (RBI). This article explores the reasons behind the rupee's fall, its historical trend, and the broader economic implications for inflation, trade, and common citizens.
The Indian rupee has now touched ₹87 per U.S. dollar, bringing back Finance Minister Nirmala Sitharaman’s statement: “And I have said this before, the rupee will find its own level.”
But as the rupee continues to slide, how far will it fall before it stabilizes? Will it truly "find its own level," or does its prolonged decline signal deeper economic concerns? With rising import costs, inflationary pressures, and a widening trade deficit, the question remains—what does this mean for businesses, consumers, and India's economic outlook in 2025?
The recent depreciation is not an isolated event but part of a broader trend influenced by both domestic and global factors.
The Indian rupee has been gradually depreciating over the past decade, reflecting global economic shifts and domestic fiscal challenges:
While the rupee’s decline has been gradual, it raises concerns about India’s long-term economic competitiveness.
A falling rupee directly impacts multiple sectors, affecting consumers, businesses, and the overall economy.
While Finance Minister Nirmala Sitharaman insists that "the rupee will find its own value", some experts believe a more proactive approach is necessary:
With the rupee at ₹87.21 per USD, many experts believe that:
The government’s "hands-off" approach to currency management may be sustainable in the short term, but long-term stability requires stronger economic policies and reduced dependency on imports.
Sitharaman’s statement that the rupee "will find its own level" reflects the government's stance on market-driven currency valuation. As the rupee continues to fluctuate, the Reserve Bank of India may assess the need for further interventions to manage volatility. With upcoming elections and ongoing economic challenges, the trajectory of the rupee will remain a key focus for policymakers
But as the rupee continues to slide, how far will it fall before it stabilizes? Will it truly "find its own level," or does its prolonged decline signal deeper economic concerns? With rising import costs, inflationary pressures, and a widening trade deficit, the question remains—what does this mean for businesses, consumers, and India's economic outlook in 2025?
Why Did the Rupee Fall to ₹87?
Indian Rupee Fall
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1. Strengthening U.S. Dollar and Global Market Uncertainty
- The U.S. Federal Reserve’s high interest rates continue to attract investors towards the dollar, weakening emerging market currencies like the rupee.
- Global uncertainties, including Middle East tensions, oil price fluctuations, and concerns about a global slowdown, have further pushed investors towards safer assets like the U.S. dollar.
- As a result, the U.S. Dollar Index (DXY) has remained above 103-104, indicating continued dollar strength.
2. India’s Widening Trade Deficit
- India’s trade deficit stood at $19.8 billion in January 2025, reflecting higher imports compared to exports.
- Crude oil, which accounts for nearly 30% of India's total imports, has become costlier due to OPEC+ production cuts and supply chain disruptions.
- A weaker rupee increases the cost of imports, further pressuring the current account deficit.
3. Foreign Investment Outflows (FII/FDI)
- Foreign investors have been withdrawing funds from Indian markets due to rising U.S. bond yields, geopolitical risks, and concerns over India’s economic stability.
- In January-February 2025 alone, foreign institutional investors (FIIs) pulled out nearly $12 billion from Indian equity and debt markets.
- This outflow has led to increased demand for the U.S. dollar, weakening the rupee further.
4. RBI’s Limited Intervention
- Unlike countries such as China, which actively manages its currency value, the RBI has chosen a non-interventionist approach, only stepping in to prevent extreme volatility rather than artificially propping up the rupee.
- Despite India’s forex reserves being above $600 billion, the central bank is using them cautiously, avoiding rapid depletion.
Historical Depreciation: How the Rupee Has Fallen Over the Years
Rupee
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| Year | Rupee Per USD | Annual Depreciation (%) |
|---|---|---|
| 2010 | ₹46 | — |
| 2013 | ₹62 | -27.5% |
| 2018 | ₹74 | -19.4% |
| 2022 | ₹78 | -5.4% |
| 2023 | ₹82 | -5.1% |
| 2024 | ₹83 | -3.6% |
| 2025 | ₹87.16 (Feb) | -2.6% (YTD) |
How a Weaker Rupee Impacts the Indian Economy
Dollar-Rupee
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Higher Inflation (Rising Import Costs)
- A weaker rupee makes imports (crude oil, electronics, raw materials, pharmaceuticals, etc.) costlier, increasing inflation.
- India imports nearly 80% of its crude oil, so any rupee depreciation results in higher fuel prices, affecting transportation, logistics, and food costs.
More Expensive Foreign Education & Travel
- Students studying abroad in the U.S., UK, Canada, or Australia will need more rupees to pay tuition and living expenses.
- International travel becomes costlier due to higher airfares, hotel charges, and local expenses.
Stock Market & Investor Confidence
- A weaker rupee can drive foreign investors away, reducing liquidity in the Indian stock market.
- Sectors dependent on foreign funding, such as startups and IT companies, could face capital shortages.
Corporate Debt Pressure
- Many Indian companies borrow in U.S. dollars, so a weaker rupee increases their repayment burden, affecting profitability.
- Sectors such as aviation, steel, and infrastructure are particularly vulnerable.
Export Advantage: A Silver Lining?
- A weaker rupee makes Indian goods cheaper for foreign buyers, potentially boosting exports in IT, textiles, and manufacturing.
- However, global demand remains uncertain, limiting how much Indian exporters can truly benefit.
Government and RBI’s Response: Is India Doing Enough?
RBI rupee
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- Strategic Forex Reserves Utilization – The RBI has $600 billion in reserves, which can be used more actively to stabilize the rupee.
- Boosting Domestic Manufacturing – Reducing import dependence on electronics, crude oil, and raw materials will reduce pressure on the rupee.
- Incentivizing Foreign Investments – Policy measures to retain FDI and prevent capital outflows are crucial to maintaining investor confidence.
- Interest Rate Adjustments – If inflation continues to rise, RBI may need to adjust interest rates to control capital flows.
Where Is the Rupee Headed in 2025?
FM Nirmala Sitharaman
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- If global market trends remain unfavorable, the rupee could touch ₹90 per dollar by mid-2025.
- If RBI actively intervenes and India’s economic outlook strengthens, the rupee may stabilize around ₹85-86 per USD.