On August 29, 2025, the Indian rupee tumbled to a fresh all-time low, reaching ₹88.24 per US dollar—exceeding its previous record of around ₹87.95. The sharp fall was triggered by concerns over newly imposed 50% tariffs on Indian exports, fueling fears of a widening trade deficit. Simultaneously, earlier in the day, the rupee briefly hit a low of ₹88.29, before stabilizing around ₹88.12 following intervention by the Reserve Bank of India (RBI).
Tariffs: The Core of Currency Slide
The depreciation comes on the heels of Washington imposing an additional 25% tariff on Indian goods, doubling the overall rate to 50%. This sudden move has sparked investor anxiety, with expectations of reduced export volumes and slumping economic growth. Hari Shyamsunder of Franklin Templeton highlighted the tariff-led strain on India’s economic landscape
Broader Economic Ripples
- Asia’s Weakest Currency: The rupee has depreciated by ~3% in 2025, marking it as the worst-performing currency in Asia.
- Exports Under Threat: Key labor-intensive sectors like textiles and jewelry—highly exposed to the US market—could suffer production cutbacks and job losses. Economists estimate India’s GDP growth could shrink by 60–80 basis points if the tariffs persist.
- Capital Outflows Mount: Foreign investors have withdrawn a staggering $9.7 billion from Indian equities and debt so far this year, destabilizing currency and balance of payments.
- Cross-Currency Weakness: The rupee also slipped to a record low against the Chinese yuan, though analysts note this depreciation may boost export competitiveness against China.
RBI’s Stabilization Efforts
Amid this volatility, the RBI stepped in to cushion the fall. Strategic dollar sales—particularly when the rupee breached the ₹88 mark—helped temper losses and signal readiness to safeguard currency stability.
What Lies Ahead
- Key Threshold to Watch: Analysts warn that should depreciation persist, the rupee could spiral further toward ₹89, a critical level for economic and market confidence.
- Export and Growth Pressures: Sustained tariffs could cripple export volumes, inflame joblessness, and dent India’s economic momentum.
- Exchange Rate Stability: Ongoing foreign capital flight and global trade tensions will likely keep the rupee under pressure, even with RBI interventions.
