Rupee Hits 90: Strategic Slide, Not a Crisis

The Indian rupee’s slide past the ₹90-per-dollar mark on December 3 has triggered concern, but SBI Research stresses that this is not a currency crisis. Instead, the fall reflects a combination of external shocks and a deliberate shift in the Reserve Bank of India’s currency management approach.

SBI notes that the rupee’s decline from 85 to 90 in under a year marks the second-fastest five-rupee drop since the taper tantrum. Despite the sharp move, the bank argues this is a “sliding rupee, not a weak rupee,” pointing out that macro fundamentals and volatility indicators remain stable.

A major trigger was the US tariff hike announced on April 2, 2025, which imposed a 50% tariff burden on Indian exports—much higher than China (30%), Vietnam (20%), Indonesia (19%), and Japan (15%). SBI estimates that nearly $45 billion of labour-intensive Indian exports came under pressure, making the rupee one of the most depreciated among major economies, down 5.5% since April.

Foreign portfolio investors have also been net sellers. Veteran banker Uday Kotak attributes the rupee’s slide partly to heavy selling by FPIs and private equity funds under FDI, which created unusual demand for dollars.

At the same time, the RBI has adopted a “hands-off” currency regime, choosing not to defend specific levels. Instead, the central bank intervened only to contain volatility, selling around $30 billion between June and October.

SBI Research points out that both India’s real and nominal effective exchange rates now show the rupee as undervalued, which could strengthen export competitiveness going forward.

Kotak AMC MD Nilesh Shah adds a structural perspective: “The destiny of the rupee is to depreciate,” citing India’s persistent inflation differential and productivity gap, which make gradual weakening inevitable.

In essence, the rupee’s fall to 90 reflects external tariff shocks, capital outflows, and a restrained RBI, but does not signal a crisis—rather a recalibration in response to global pressures.