The Indian Rupee has fallen to a record low, settling at 91.97 against the US dollar on Friday, January 30, 2026. This decline occurs ahead of the presentation of the 2026 Union Budget, adding to concerns about the currency's stability.
Factors Contributing to the Rupee's Weakness
Several factors have contributed to the rupee's recent depreciation. Persistent foreign capital outflows have exerted significant pressure. Foreign portfolio investors (FPIs) have been selling Indian assets, repatriating funds following a sharp sell-off in the Indian stock market. This selling has erased an estimated $160 billion in market value year-to-date. In January alone, FPI outflows neared $1 billion, following approximately $18 billion in outflows during the previous year. These large-scale exits have created substantial dollar demand, weakening the rupee.
Strong dollar demand from domestic importers and corporations for overseas payments has further strained the rupee. A widening import bill, driven by elevated prices for commodities like crude oil and gold, has added to the pressure.
Global economic uncertainty has also played a role, with investors favoring safe-haven assets like the US dollar amidst geopolitical tensions and volatile trade policies. Rising geopolitical uncertainty increases risk aversion, which keeps emerging market currencies under pressure. The dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.45% higher on Friday.
RBI Intervention and Outlook
The Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market to manage the rupee's decline. The central bank has reportedly sold dollars to curb excessive volatility. Data indicates that the RBI sold $1.7 billion in November 2025 to support the currency. However, the RBI's interventions appear to be focused on smoothing the depreciation rather than defending a specific level.
Market analysts maintain a cautious outlook for the rupee in the near term. Some forecasts suggest the currency could weaken further, potentially testing the 92.25 level. However, some analysts are more optimistic about the fiscal year 2027, expecting the rupee to improve, potentially averaging below 90, supported by better valuations and stable inflation. The Economic Survey 2025-26 stated that the rupee is "punching below its weight".
Impact and Concerns
The rupee's depreciation has several consequences. A weaker rupee raises the cost of imports, affecting sectors such as energy, overseas education, and electronics. Currency volatility also heightens investor caution, contributing to foreign capital withdrawals and adding pressure on equity and fixed-income markets.
The Economic Survey 2025-26 noted that the stability of the Indian rupee is affected by India's trade deficit in goods, which isn't offset by the surplus in services and remittances. The survey also highlighted that countries with strong, stable currencies are typically strong exporters of manufactured goods.
Despite the concerns, some argue that a weaker rupee could offset the impact of higher American tariffs on Indian goods to some extent.
Going forward, the market's attention is focused on the upcoming Union Budget, with investors looking for cues that could stabilize the currency. The government's priorities are expected to include measures to ease business operations, reduce red tape, and increase spending on infrastructure projects.
