Since 2014, the Indian Rupee (INR) has experienced a significant depreciation against the US Dollar (USD), falling by approximately 30%. Several factors have contributed to this decline, and the question remains whether this trend will continue.

Historical Context and Recent Trends

In 2014, the exchange rate was around ₹60.95 per USD. As of September 25, 2025, the rupee has weakened to approximately ₹88.6960. Earlier this week, the currency touched a record low of 88.7975. This represents a considerable drop, impacting various facets of the Indian economy. The rupee has fallen more than 3% this quarter, marking its steepest decline since April–June 2022. The rupee has depreciated 3.3 per cent against the US dollar between October 2024 and January 2025.

Factors Influencing the INR/USD Exchange Rate

• Trade Deficit: India's persistent trade deficit, where imports exceed exports, creates a higher demand for US dollars, thus weakening the rupee. In August 2025, India's merchandise exports rose 6.72% to $35.1 billion, while imports grew 2.13% to $306.52 billion during April-August 2025-26.
• Current Account Deficit (CAD): A high CAD means India is spending more than it earns in foreign exchange, leading to increased borrowing and a weaker rupee. Rising gold imports contribute to the widening of the CAD, putting additional pressure on the INR.
• Inflation: Higher inflation in India compared to the US erodes the rupee's purchasing power, causing it to depreciate.
• US Federal Reserve Policies: Rising US Treasury yields and potential interest rate hikes by the US Federal Reserve make dollar-denominated assets more attractive, strengthening the dollar and weakening the rupee.
• Geopolitical Factors: Global events, geopolitical tensions, and trade issues can increase demand for the safe-haven dollar, putting downward pressure on the rupee. The USD to INR exchange rate in 2025 has been marked by volatility, influenced by geopolitical tensions, economic indicators, and central bank policies.
• RBI Policies: The Reserve Bank of India (RBI) has strategically relaxed its control over the INR, allowing it to depreciate more freely against the USD. The RBI's interventions in the forex market can also influence the rupee's value.
• Foreign Portfolio Investment (FPI): Sustained foreign portfolio investor (FPI) outflows have put pressure on the rupee.
• US Tariffs and Visa Fees: A sharp rise in US visa fees and the imposition of 50% US tariffs on Indian goods have raised concerns over India's IT sector, leading to a drop in technology stocks and further rupee depreciation.

Impacts of a Weakening Rupee

• Exporters Benefit: A weaker rupee can make Indian exports more competitive in the global market, boosting export revenue.
• Importers Suffer: Imports become more expensive, increasing costs for businesses and consumers. India's import basket includes items like crude oil, coal, chemicals, and machinery.
• Inflation: A weaker rupee can lead to imported inflation, as the cost of imported goods rises.
• Remittances and Trade: The rupee's depreciation impacts remittances and trade.

Expert Forecasts and Future Outlook

Experts suggest a mixed outlook for the rupee:

• Some analysts expect the rupee to remain under pressure amid global uncertainties, potentially reaching ₹90 per USD by fiscal year 2026.
• The Indian Rupee is expected to trade at 88.16 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, they estimate it to trade at 88.35 in 12 months time.
• The rupee is forecasted to trade within the 88.00 - 90.00 range by the end of 2025.
• Other forecasts suggest a gradual depreciation of the Indian Rupee through 2026, with the exchange rate clustering between 90.00 and 102.00 INR per USD between 2026 and 2030.
• The near-term trajectory of INR will depend on US tariffs impact on India's economic growth, the FIIs outflows, RBI's intervention strategy and geopolitical developments.

Conclusion

The Indian rupee has faced significant depreciation against the US dollar since 2014, influenced by a combination of domestic and global factors. While a weaker rupee can benefit exporters, it also poses challenges such as increased import costs and inflation. The future trajectory of the INR/USD exchange rate will depend on various factors, including global economic conditions, US policies, RBI interventions, and India's economic performance.