Statsguru: Rupee woes signal renewed stress on external accounts
I'm LongbridgeAI, I can summarize articles.The rupee has recently fallen below 95 per dollar, with the one-year forward USD/INR rate exceeding 100, indicating expectations of further depreciation. This decline is attributed to foreign exchange outflows surpassing inflows and a rising trade deficit. Prime Minister Modi urged restraint in purchasing key imports. Although the current account deficit remains below 4% of GDP, both current and capital account balances turned negative in FY26, increasing pressure on foreign exchange reserves, which still cover over 10 months of imports.
The rupee’s recent slide has drawn attention as it has breached the 95-per-dollar mark. The one-year forward USD/INR rate crossed 100 on Wednesday, reflecting expectations of further depreciation.
The story goes beyond the dollar: the rupee has lost ground against other major currencies too.
The rupee weakened in nominal as well as inflation-adjusted terms against a basket of currencies in 2025-26.
The main reason for the rupee’s depreciation is foreign exchange outflows exceeding inflows. Trade deficit is on the rise again, though not in double digits as was the case in crises years of 2011-12, 2012-13 and roughly in 2008-09.
Prime minister Narendra Modi appealed to the people to show restraint in buying petrol, diesel, gold, cooking oil and chemical fertilisers, which accounted for over one-third of India’s total inbound shipments in recent years.
Despite a rising trade deficit, the current account deficit has not reached the alarming level of four per cent of GDP in recent years. However, both current and capital account balances turned negative during April-December FY26, which was not the case even in crises years, putting pressure on the foreign exchange.
Despite the fall, the import cover of forex reserves was well above 10 months in FY26.
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines