The reason behind the Indian rupee’s historic low
Last Updated on December 28, 2024 7:13 am
The Indian rupee has hit its lowest level in history. The rupee has been losing value continuously for seven consecutive trading sessions. The rupee has fallen several times against the US dollar in the current quarter. The rupee’s decline continues due to the trade deficit and capital outflows abroad.
On Thursday (December 26), the value of the dollar stood at 85.2425 rupees per dollar, which is the lowest price in the history of the rupee. The rupee has lost 1.74 percent of its value since the beginning of October. This is the first time since the July-September quarter of 2022, the rupee is in its worst state in a quarter, according to news agency Reuters.
India’s foreign trade balance is not stabilizing at all. At the same time, the dollar has increased in the international market after Donald Trump was elected president and additional profits are being made against bonds. For these reasons, the Indian rupee is losing its value against the dollar.
According to IDFC First Bank data, India’s trade deficit increased by 18.4 percent between April and November this year compared to the same period last year. In addition, foreign money and loans invested in India have been withdrawn, which amounted to 10.3 billion (1,300 million) dollars in the current quarter. In the previous quarter, India received investments of 20 billion or 200 million dollars.
Economists say that due to these reasons, India’s current account deficit has been created in the current quarter. It is expected that India will have a positive current account balance of 20 billion (2,000 million) to 30 billion (3,000 million) dollars at the end of the current fiscal year. India had a trade surplus of 60 billion (6,000 million) dollars in the last fiscal year.
IDFC First Bank said that the Indian rupee will be under pressure due to the current account balance situation and the strong dollar. The bank believes that the price of one dollar will stand at 86 rupees by September 2025. That is, the Indian rupee will weaken further during this time.