Why India’s Currency Has Kept Falling for 30 Years - And What That Really Means

Nidhi | Dec 10, 2025, 14:12 IST

Rupee opens lower as FII outflows continue

( Image credit : IANS )

For three decades, the Indian rupee has moved in one direction - down. From ₹31 per dollar in the mid-1990s to nearly ₹90 today, the slide looks dramatic, but the real story is deeper than headlines suggest. This article breaks down why the rupee keeps weakening, what global and domestic forces drive the fall, and what it means for India’s growth, inflation, imports, salaries, and the future of the economy. A clear, data-driven explainer for anyone trying to understand India’s long currency decline.

Currencies tell the truth long before governments or markets do.
Over the past three decades, the Indian rupee has slid from ₹31 per dollar in 1994 to ₹83–₹84 in 2024, and recently breached the ₹90 mark for the first time ever.

This decline is not a mystery. It follows a clear pattern shaped by India’s inflation gap, energy dependence, capital outflows, global dollar cycles, and shifting economic fundamentals.
To understand the fall, we must examine not just why the rupee weakens - but when, how, and under what pressures each drop occurred.

1. The Rupee’s 30-Year Decline, A Clear Chart View (1994–2025)

Dollar and Rupee

( Image credit : Ai )

Below is a concise data chart showing how the rupee moved, with major triggers:

Year/Range	Avg. INR per USD	Key Drivers
1994	₹31	Market-determined rate introduced
1997	₹36	Asian Financial Crisis
1998–99	₹42–43	Oil volatility, sanctions after nuclear tests
2002–04	₹47–46	IT boom, moderate stability
2007	₹39	Heavy FII inflows (rare appreciation)
2008	₹50	Global Financial Crisis
2011	₹53	High inflation + rising oil
2013	₹68	CAD crisis + Fed Taper Tantrum
2016	₹67	Global slowdown concerns
2018	₹74	Fed rate hikes + $85 oil
2020	₹76	COVID shock
2022	₹80+	Russia–Ukraine war + commodity surge
2023	₹82.7	Strong USD cycle
2024	₹83.3	Dollar demand + trade deficit
2025	₹90+	Trade uncertainty, FII outflows, higher imports, moderated RBI intervention

Net depreciation:
₹31 → ₹90+ in ~31 years
Avg. annual decline: ~2.5–3%

2. Inflation Gap: The Most Reliable Predictor of Long-Term Rupee Depreciation

For decades:

India's inflation = ~6%
US inflation = ~2–3%

A country with consistently higher inflation must see its currency weaken to maintain purchasing power parity.

This differential alone explains much of the rupee’s fall from ₹3 → ₹90 over 80 years, and from ₹31 → ₹84 over the last 30 years.

3. India’s Import Structure: The Core Structural Drag

India's cut in Russian oil imports can only be for very brief period: Kremlin spokesman

( Image credit : IANS )

India imports:

85–87% of its crude oil
50% of its natural gas
A large share of electronics, semiconductors, machinery, metals, fertilizers
Gold, one of India's biggest recurring import items

When global prices rise or the dollar strengthens:

India’s import bill jumps
Dollar demand surges
The rupee falls

This is why major depreciation phases (1966, 1991, 2013, 2022, 2025) coincide with oil shocks or global commodity spikes.

4. The Trade Deficit: India’s Most Persistent Vulnerability

India’s merchandise trade deficit frequently touches:

$20–27 billion per month
$250–260+ billion annually

Meanwhile, services exports (IT, tourism, remittances) cannot fully offset merchandise imports.

A large, persistent trade deficit means:

Outflow of dollars > inflow
Rupee faces continuous downward pressure
RBI must intervene or allow controlled depreciation

The 2024–25 fall toward ₹90 occurred alongside one of India’s widest combined trade + capital account pressures in recent years.

5. Capital Outflows, Fed Policy & Dollar Cycles: The Immediate Trigger for the 2025 Slide

Here's why everyone's talking about a 'K-shaped' economy

( Image credit : AP )

The steepest declines in 2013, 2018, 2022, and now 2025 share one common feature:
A strong US dollar and falling global risk appetite.
In 2025:

Foreign institutional investors (FIIs) pulled out capital from emerging markets
US tariffs and protectionist measures tightened global financial conditions
Higher US interest rates attracted capital away from India
Asian currencies (JPY, KRW, THB) also hit multi-decade lows

The rupee was not alone - it simply repriced with the global cycle.

6. RBI’s Strategy Shift: Stability, Not Defending a Number

RBI plans long-term USD/INR swap to boost liquidity

( Image credit : ANI )

Earlier, the RBI aggressively defended psychological levels (₹60, ₹70, ₹80).
But in 2024–25, it pivoted to:

Preserving forex reserves
Allowing orderly adjustment
Avoiding unnecessary dollar burn
Only smoothing volatility, not fixing the rupee at a level

This is why the slide below ₹90 happened without panic or disorder.

A controlled depreciation is safer than an artificial defence that collapses suddenly.

7. What the Rupee’s Fall Toward ₹90 Means for Households and Businesses

What becomes costlier

Fuel, LPG, and transport
Imported electronics and mobile phones
Foreign education
Overseas travel
Industrial inputs (metals, chemicals, machinery)

Sectoral impact

IT companies earn more per dollar
Exporters become more competitive
Import-heavy industries face margin pressure
FMCG, autos & manufacturing see increased input costs

Macro impact

Inflation may rise further
RBI may hold rates higher for longer
Government’s subsidy burden increases
Household savings erode faster if not beating inflation

The rupee’s weakness ultimately shows up as higher cost of living for ordinary Indians.

A Rupee at ₹90 Is Not a Collapse, It Is a Wake-Up Call

The rupee doesn’t weaken because India is collapsing.
It weakens because:

India’s inflation remains higher than the US
Imports exceed exports by a wide margin
Oil dependence is structural
Capital flows are volatile
The dollar remains the world’s dominant currency

The question now is not:

“Will the rupee fall further?”
It may - in line with global cycles.

The real question is:

Can India build an economic structure where growth no longer depends on dollar-priced imports?
Because a currency does not grow strong through emotion or defence —
it grows strong when a nation produces what the world must buy.

GENERAL

Nidhi