By Anushka Verma | Updated: October 30, 2025
Introduction
The Indian rupee plunged to a record low of ₹88.75 against the US dollar on Tuesday, underscoring the mounting stress on emerging market currencies amid a combination of global and domestic headwinds. The local currency depreciated by 44 paise from its previous close of ₹88.31, breaching the psychologically critical level of ₹88.80 during intraday trade — its weakest mark ever recorded.
The fall comes at a time when foreign portfolio investors (FPIs) are pulling out funds from Indian equities, global bond yields are surging, and the US dollar continues to dominate as the world’s safe-haven currency. Over the past three months alone, FPIs have withdrawn ₹61,522 crore from Indian markets, intensifying the downward pressure on the rupee.
Meanwhile, the recent hike in the H-1B visa application fee by the US administration has triggered renewed concerns for India’s information technology (IT) industry — a key contributor to foreign exchange inflows. With oil prices staying elevated near $96 a barrel and the global geopolitical landscape fraught with uncertainty, India’s external balance sheet has come under visible strain.
Economists warn that if these pressures persist, the rupee could face further weakness in the short term, with potential implications for inflation, import costs, and overall investor sentiment.
Market Snapshot: The Fall in Numbers
To understand the magnitude of the rupee’s depreciation, it’s important to look at how quickly the slide has unfolded and what indicators have shifted alongside it.
| Indicator | September 2025 | October 2025 | Change/Impact |
|---|---|---|---|
| Rupee (₹/USD) | 87.20 | 88.75 | ₹1.55 weaker |
| Foreign Portfolio Outflows | ₹41,000 crore | ₹61,522 crore | 50% higher withdrawal |
| Brent Crude Oil | $89/barrel | $96/barrel | Higher import cost |
| US 10-Year Treasury Yield | 4.35% | 4.71% | Strengthens USD |
| Dollar Index (DXY) | 104.5 | 108.1 | Dollar near 2-year high |
| Sensex | 72,100 | 71,230 | Marginal decline amid volatility |
This snapshot reflects the broader economic narrative — the rupee’s fall is not an isolated domestic issue but part of a global currency realignment being driven by strong US data, hawkish central bank policies, and risk aversion among investors worldwide.
Global Forces Driving the Decline
The US economy’s continued resilience has made the dollar stronger against nearly every global currency. The US Federal Reserve’s hawkish tone, combined with its reluctance to signal rate cuts, has pushed US bond yields higher, attracting foreign investors toward dollar-denominated assets.
This shift has created a ripple effect across emerging markets, where currencies like the Chinese yuan, Indonesian rupiah, and Philippine peso have also depreciated. The rupee, however, has been hit harder due to India’s significant import dependence and persistent trade imbalances.
Adding to this, geopolitical conflicts in the Middle East have raised oil prices and global risk perceptions. For India, which imports over 80% of its crude oil needs, this results in a direct increase in dollar demand from oil marketing companies, further pressuring the exchange rate.
Economist Ritu Sharma from Axis Capital notes:
“The rupee’s weakness is a reflection of a wider global phenomenon where dollar strength and geopolitical fears are driving capital flows. However, India’s twin deficits — fiscal and current account — make it particularly vulnerable.”
Impact of the H-1B Visa Fee Hike
The US administration’s move to raise H-1B visa fees for new applications has sparked unease across India’s IT industry — a sector that contributes nearly 8% of India’s GDP and earns billions in foreign exchange each year.
The increased visa costs could strain profit margins for leading IT giants such as TCS, Infosys, and Wipro, which depend on these work permits to deploy skilled professionals to their largest client market — the United States.
The announcement led to a sell-off in IT stocks on Dalal Street, contributing to broader weakness in the rupee as investor sentiment turned negative. Analysts believe this move might deter Indian firms from expanding operations abroad, ultimately reducing foreign currency inflows.
Market expert Ashok Mehta explained:
“The IT sector has been a cushion for India’s forex reserves for decades. Any disruption in that ecosystem can have a cascading effect on the rupee’s stability.”
Foreign Portfolio Investors Turn Defensive
The rupee’s record low is also linked to sustained capital outflows from the Indian equity and debt markets. FPIs have been offloading shares amid global uncertainty, concerns about stretched valuations, and fears that India’s export competitiveness could weaken further as the currency slides.
In the last quarter alone, foreign investors have sold a net ₹61,522 crore of Indian equities, the sharpest outflow since 2020. Much of this has moved into US treasuries, offering near 5% returns with minimal risk.
While domestic institutional investors have tried to offset these withdrawals by buying equities, their efforts haven’t been enough to stabilize the rupee.
The Reserve Bank of India’s Response
The Reserve Bank of India (RBI) has so far adopted a cautious approach. Rather than intervening aggressively in the forex market, it appears to be allowing the rupee to adjust gradually.
According to traders, the RBI likely sold small amounts of dollars to smooth volatility but did not attempt to defend any specific level. The central bank’s foreign exchange reserves, currently around $580 billion, give it enough ammunition to intervene when necessary.
RBI Governor Shaktikanta Das has repeatedly said that the bank does not target a specific exchange rate, focusing instead on preventing “excessive volatility.”
However, if the slide continues and inflationary pressures rise, the RBI might increase intervention or tighten liquidity domestically to curb speculative positions.
Impact on Key Sectors
The rupee’s depreciation carries mixed consequences across industries:
- Exporters (Positive):
Sectors like textiles, pharmaceuticals, and IT may benefit from a weaker rupee as their dollar earnings translate into higher rupee income. - Importers (Negative):
Industries dependent on imported raw materials — such as oil, chemicals, and electronics — face rising costs. - Aviation (Severely Impacted):
Airlines, already reeling under high jet fuel prices, could see a surge in operational expenses. - Auto and Electronics:
Higher import costs for components could lead to price hikes for consumers in the coming months. - Consumers:
Everyday goods, from cooking oil to mobile phones, may become more expensive if the rupee remains weak, feeding into inflation.
Inflation Concerns and Policy Dilemma
A weakening currency almost always raises concerns about imported inflation. India, being a major importer of crude oil and consumer goods, faces a direct inflationary risk whenever the rupee slides.
Consumer Price Index (CPI) inflation has already hovered near 5.4% in recent months — close to the upper limit of the RBI’s tolerance band. If the rupee remains under pressure, inflation could climb again, forcing policymakers to walk a tightrope between supporting growth and maintaining price stability.
Economist Devika Nair warns:
“A prolonged fall in the rupee can complicate monetary policy decisions. The RBI may have to balance between defending the rupee and supporting growth at a time when exports are softening and demand is plateauing.”
Historical Perspective: The Rupee’s Journey
The rupee’s fall to ₹88.75 marks a symbolic moment in India’s economic evolution. Over the past decade, the currency has seen multiple phases of stress:
| Year | Event | Rupee Level (Approx.) | Reason |
|---|---|---|---|
| 2013 | “Taper Tantrum” Crisis | ₹68.85 | Fed policy shock |
| 2018 | Oil Price Surge | ₹74.48 | Crude at $85/barrel |
| 2020 | COVID-19 Pandemic | ₹76.90 | Global uncertainty |
| 2022 | Fed Tightening | ₹83.29 | Dollar strength |
| 2024 | Trade Deficit Widening | ₹86.90 | Weak exports |
| 2025 | Current Record | ₹88.75 | Visa fee hike, FPIs exit |
Each of these downturns has tested India’s resilience, but this year’s depreciation feels more structural than cyclical, as multiple global and domestic factors are colliding simultaneously.
Expert Opinions: What Lies Ahead
Market experts remain divided on whether the rupee has found its bottom or if further weakness is imminent.
Some analysts believe the rupee could stabilize near ₹89 per dollar in the short term, supported by strong domestic growth and healthy forex reserves. Others caution that if global headwinds persist — especially high oil prices and strong US yields — the rupee might slide toward ₹90 in the coming months.
“The rupee’s trajectory will depend largely on how the Fed signals its next move. If the dollar continues to strengthen, even a $600 billion reserve won’t fully shield the rupee,” said currency strategist Nitin Jha.
Impact on Ordinary Citizens
For ordinary Indians, the rupee’s weakness manifests in multiple ways — higher fuel prices, costlier foreign travel, and more expensive electronic goods. Students studying abroad or travelers making payments in dollars will feel the pinch immediately.
On the flip side, NRIs remitting money to India will benefit as their dollar earnings convert to higher rupee amounts. Export-driven businesses in small cities, particularly in textiles and handicrafts, might also enjoy improved margins.
Government and Policy Outlook
The Indian government is expected to maintain a watchful stance. While the Ministry of Finance is unlikely to intervene directly, coordination with the RBI on capital flow management is expected to continue.
Policymakers are focusing on long-term measures such as boosting export competitiveness, diversifying import sources, and encouraging local manufacturing under the “Make in India” initiative.
However, experts argue that structural reforms in logistics, trade finance, and taxation are equally vital to shield the rupee from recurring external shocks.
Looking Ahead: Can the Rupee Recover?
Recovery will depend on a mix of global and domestic developments.
If the US Federal Reserve softens its tone and crude prices ease, the rupee could regain some ground. On the domestic front, reviving exports, sustaining FDI inflows, and controlling inflation will be key.
India’s fundamentals remain strong — GDP growth above 6.5%, a robust services sector, and large forex reserves — all of which provide a buffer against a full-blown currency crisis.
Yet, as the world becomes increasingly volatile, the rupee’s future will depend not just on India’s policies but also on how global capital flows evolve in the months ahead.
Conclusion
The fall of the rupee to ₹88.75 per US dollar marks a defining moment in India’s economic landscape — one shaped by global power shifts, policy changes, and investor behavior. While the depreciation reflects temporary global pressures, it also underlines deeper structural challenges that India must address to build a more resilient currency.
The coming months will be critical. A measured approach by the RBI, strategic fiscal management by the government, and continued investor confidence will determine whether this is a short-lived storm or the beginning of a prolonged currency adjustment.
For now, the rupee’s decline serves as a reminder of how interconnected global economies have become — and how even a single policy move across the world can ripple through Indian markets, households, and businesses alike.
