The Indian rupee continued to decline against the US dollar in December. For several months now, the value of the rupee has been slipping compared to the dollar, and this has pushed India’s currency to a new record low. Even though the Indian economy is growing at a significant pace, the rupee’s downward slide has not stopped.
On Monday, the rupee fell to ₹89.83 per US dollar, almost touching the 90 marks. Two weeks earlier, the exchange rate had dropped to ₹89.49 per dollar. Monday’s figure surpassed even that level.
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Why Is the rupee falling?
In the second quarter of the current financial year, India’s GDP grew by 8.2%, beating forecasts made by the Reserve Bank and several other institutions. The country’s stock markets have also been showing strong positive sentiment in recent weeks. Yet, the rupee continues to weaken.
Experts from Kotak Securities and DSB Bank say the decline has been driven by a lack of progress in trade negotiations between India and the United States. As a result, the trade deficit is widening. In October, India’s trade gap with the US reached its highest level.
Additionally, foreign investors pulling money out of Indian markets has also added pressure on the rupee.
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Despite solid economic growth, the Indian currency has been one of the weaker performers in Asia this year. Because of this, experts fear that the rupee may soon cross and remain above the ₹90-per-dollar mark. If every US dollar starts costing more than ₹90, India’s currency could face further devaluation.
However, many analysts believe that a favourable trade agreement with the United States could help the rupee recover from this decline.
