Indian Rupee Under Pressure in 2025: External Shocks, Not Crisis

• Indian Rupee depreciated 4.7% in 2025, reaching near historic lows against the US dollar, following a 2.8% slip in 2024.
• Decline primarily due to external factors: global dollar strength, $10 billion FPI outflows, US tariffs on Indian goods, and narrowing yield differential.
• Despite currency weakness, India's domestic macro fundamentals remained resilient with strong growth, eased inflation, and fiscal stability.
• RBI actively managed volatility, adding $50 billion to forex reserves and allowing a "managed crawl" depreciation to prevent a crisis.
• 2026 outlook: Rupee expected to trade in Rs 88-92 range, influenced by US Fed rate cuts, oil prices, and capital inflows.

Why It Matters: Rupee's 2025 depreciation was due to global shocks, not domestic fragility, with RBI managing stability.