New Delhi: The rupee fell to a record low on Monday, December 1, days after reports of strong fundamentals and high GDP growth. The rupee was recorded at 89.7575 against the US dollar, marking its weakest level to date, Reuters reported.

This sharp depreciation highlights the growing pressure from trade-war uncertainty, heavy dollar demand and weakening external flows. It also coincides with economists’ reassessment of India's macroeconomic fundamentals and questions whether high GDP growth numbers fully capture underlying economic vulnerabilities.

The currency’s slide was driven by maturing non-deliverable forward (NDF) positions, sustained foreign portfolio outflows and volatile global crude oil prices. These factors contributed to intensify demand for the dollar. India is the only major economy yet to forge a trade pact with the US, following its doubling of tariffs on Indian exports this summer. This too has weakened the rupee, exacerbating its slide downwards.

The Reserve Bank of India (RBI) has been intervening of late, by selling dollars to contain volatility, the Hindu Business Line reported on Monday. Over US $26 billion have been sold, while large forward-market short positions have been taken to stabilise the rupee since September 2025.

However, persistent external pressures have kept the rupee near record lows, it was widely reported on December 2. Broader financial markets reflected this stress, with Indian equities declining and investor sentiment remaining cautious amid ongoing tariff uncertainties.

Rupee weakness has implications for inflation and import costs, though it is a problem that has persisted for nearly a year, when the currency breached 87 against the dollar. The falling rupee also has implications for India's crude oil imports and that of other essential commodities – elevated demand for dollars, unbalanced by adequate dollar supplies, will likely place more downward pressure on the rupee, the New Indian Express reported on Monday.

Higher import bills may also add to domestic price pressures, putting the spotlight on the RBI, which may begin to reconsider its monetary stance.

Exporters might benefit from the weaker rupee, as their goods become more competitive overseas, but rising costs for imported raw materials will likely offset gains. Economists have noted that sustained volatility in the rupee could affect foreign investment inflows too, Mint reported on Tuesday.

FII or foreign institutional inflows turned negative in India in 2025, with massive pull outs reported by the Economic Times again recently.

Market participants will closely watch the RBI and government regarding progress of trade negotiations with the US, which could ease some of the external pressures.

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