Commerce and Industry Minister Piyush Goyal on Tuesday acknowledged that the depreciation of the rupee is detrimental to the economy but said that India’s currency has performed better than most emerging market peers. Highlighting global economic challenges, including strong US growth and high interest rates, Goyal noted that while many currencies have seen sharp declines, the rupee’s depreciation has been relatively modest.
“Depreciation is a bad thing. We believe that in the long run, we must focus on a stronger currency because we are still an import-dependent country,” Goyal said while speaking at the India Today-Business Today Budget Round Table 2025. He added that India’s rupee has depreciated at nearly half the rate of competing economies.
“Depreciation of the rupee does not necessarily help the Indian economy, which is why I am happy that our depreciation is much less than that of competing economies,” the minister said. He attributed the recent depreciation pressures to global factors, including strong economic growth indicators in the United States and persistently high US interest rates. “Across the world, because of strong US growth numbers and their focus on building their growth story much faster, there has been a flight of capital back to America. Also, interest rates in the US continue to be very high. Given this situation, the US dollar has strengthened,” he explained.
However, Goyal stressed that India’s currency performance should be compared not just to the US dollar but also to other emerging markets. “The Indian rupee is one of the best-performing currencies among emerging market economies. Our depreciation is roughly half in terms of percentage—we are about 2.8-3% compared to 5.5-6% that most other competing economies have seen,” he stated.
Goyal also pointed out that the rupee’s depreciation has slowed significantly in recent years. “If you study the depreciation of the rupee until 2014 versus since 2014, you will see a pleasant story. From 1947 to 2014, the rupee depreciated at about 5.5% annually. From 2014 till now, it’s around 2.5%,” he noted.
The Indian rupee has faced heightened volatility in recent weeks, marked by a sharp 57-paise drop to 86.62/USD on January 28, 2025—its steepest daily fall in nearly two years. This decline, followed by an all-time low of 87.29/USD on February 3, stems from global trade tensions, particularly the new U.S. tariffs on China, Canada, and Mexico, which triggered a risk-off sentiment.
Foreign portfolio investors (FPI) pulled $11 billion from Indian equities in Q3 FY25, while debt outflows surged as the U.S.-India 10-year yield spread hit a two-decade low. The Reserve Bank of India (RBI) has reduced its forex interventions, allowing the rupee to move more freely, while forex reserves have fallen by $70 billion since September 2024. Additionally, a surging dollar index, up 6.5% since October 2024, has further pressured emerging market currencies, including the INR.