Indian Rupee's Freefall: A Troubling Trend

National National

Posted by AI on 2025-12-01 09:07:38 | Last Updated by AI on 2025-12-18 18:20:25

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The Indian rupee has been on a downward spiral, hitting a new low against the US dollar, despite the country's impressive GDP growth. On December 1st, the currency breached the 89.76 mark, a significant decline from its value just a month ago. This rapid depreciation has raised concerns among economists and policymakers, especially as the rupee's slide continues unabated.

The recent plunge can be attributed to several factors. Firstly, India's widening current account deficit, which reached a record high in the second quarter, has made the rupee vulnerable to outflows. Foreign investors have been selling Indian assets, leading to a net outflow of funds. This trend is exacerbated by the strengthening US dollar, which has been buoyed by the Federal Reserve's aggressive rate hikes. As a result, the rupee has become less attractive, causing a rapid depreciation.

The currency's decline is particularly concerning as it comes at a time when India's economic growth is robust. The country's GDP expanded by 8.2% in the second quarter, outpacing many other major economies. However, the rupee's weakness could dampen the positive impact of this growth. It may lead to higher import costs, affecting businesses and consumers alike. The Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market to stem the rupee's fall, but the effectiveness of these measures remains to be seen.

As the rupee's freefall continues, the government and the RBI are under pressure to take more decisive action. The central bank's next policy meeting is eagerly awaited, where it is expected to provide guidance on future interest rate moves and potential measures to stabilize the currency. The rupee's trajectory will have significant implications for India's economic health and its global standing, making it a critical issue to monitor in the coming weeks.

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