On 15 May 2026, the Indian rupee continued its downward trend, opening 11 paise lower at 95.87 against the US dollar.
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Mithilesh Kumar Sinha
On 15 May 2026, the Indian rupee continued its downward trend, opening 11 paise lower at 95.87 against the US dollar. This decline is attributed to rising US treasury yields, high crude oil prices, and ongoing foreign fund outflows that have significantly impacted the domestic currency. The rupee has now experienced a weakening trend for three consecutive sessions, with a decline of approximately 1.36% this week, reaching new record lows. On 14 May, the rupee hit an unprecedented intraday low of 95.9575 against the dollar before making a slight recovery. This was influenced by sustained foreign equity outflows, strong demand for dollars from oil marketing companies and importers, as well as limited dollar selling by exporters, which collectively contributed to a negative sentiment.
As the Indian Rupee approaches the historic psychological threshold of 96 to 99 against the US Dollar, the economy is confronted with considerable challenges. The detrimental effects arise from India’s substantial dependence on dollar-denominated imports, which exacerbate inflation, expand trade deficits, and elevate the overall cost of living for its citizens.
As of the current year, the Indian Rupee has depreciated by over 6%, with resistance levels in the short term identified around 96 and 97. In a worst-case scenario involving an intensifying conflict between the US and Iran, should WTI oil prices reach $120 per barrel, the rupee may near the 100 mark, thereby jeopardizing the economy.
If the rupee continues to weaken towards the psychologically significant INR 100 per dollar threshold, the repercussions on the Indian economy and equity markets could be considerable and vary across different sectors. A shift of the Indian rupee towards INR 100 per US dollar would have a profound effect on both the economy and the stock market. A depreciated rupee raises import expenses, particularly for crude oil, electronics, and chemicals, which in turn leads to inflationary pressures. Sectors reliant on imports, such as aviation, FMCG, and automobiles, may experience pressure on their margins.
Weakening rupee will expand current account deficit (CAD). A depreciated currency significantly increases the country's import expenses, while export earnings do not rise at the same rate. This exacerbates the CAD, exerting additional downward pressure on the rupee and diminishing foreign exchange reserves. Depreciated rupee will push expenses on rise associated with foreign debt servicing. Both the Indian government and private enterprises secure financing through foreign loans. A weakening rupee means that the repayments of both principal and interest become significantly more costly in terms of local currency, putting pressure on the budgets of both the government and corporations.
Declining currency will make more expensive international travel and education. For those intending to travel overseas or seek higher education in the United States or countries with a dollar-pegged currency, the purchasing power significantly diminishes. Families must dedicate a greater portion of their savings to cover tuition fees, housing, and travel costs in USD.
Weakening rupee will push inflation on rise and Living Costs Given that India imports nearly 90% of its crude oil and settles payments in dollars, a depreciating rupee results in the nation incurring higher costs for the same quantity of fuel. The rising prices of crude oil, fertilizers, and electronic components will generate imported Inflation which directly lead to increased retail prices. Consumers in Mokokchung, Nagaland, and throughout the country experience the burden of higher transportation costs, increased grocery prices, and elevated prices for everyday goods.
The strain on the rupee will put margin pressures on Industries such as fast-moving consumer goods (FMCG), automotive, and aviation are experiencing significant pressure on their profit margins due to increasing production and operational expenses. In an effort to address inflation and stabilise the currency, the Reserve Bank of India (RBI) is likely to sustain elevated interest rates, resulting in higher equated monthly installments (EMIs) for loans, including home and auto loans, making them expensive for consumers. Depreciated currency will put strain on corporate margins and loan EMIs. Numerous domestic Indian firms depend on imported raw materials, machinery, and technology.
Although a declining currency presents difficulties for overall macroeconomic stability, it offers a significant advantage to certain export-focused sectors. Indian exports gain a competitive edge on the global stage, particularly benefiting the pharmaceutical, textile, and manufacturing sectors. Firms generating revenue in dollars may report enhanced profits, which could bolster certain sectors within the stock market. Maintaining a portion of investments in gold can serve as a hedge against currency depreciation and inflation. Gold prices in India might escalate further if the rupee experiences a significant decline, as the cost of bullion imports rises. This situation could heighten inflationary pressures and impact consumer spending.
Effectively managing a declining rupee necessitates a combination of macroeconomic policy measures implemented by the central bank and prudent wealth protection strategies for individuals. In response to the recent depreciation of the rupee, potential solutions include managing foreign exchange reserves, adjusting monetary policy and interest rates, enhancing exports while limiting imports, and encouraging capital inflows. Moreover, personal expenditure too needs to reduce.
(The writer is retired professor of Nagaland University, Lumami)