The value of a nation’s currency reflects the health of its economy, global competitiveness, and investor confidence. The Indian rupee has experienced periods of depreciation for several reasons — global and domestic. Understanding these causes is the first step toward building policies that can strengthen the rupee in the long run. Why the Rupee Falls: Deep-Dive Into the Underlying Causes 1. High Import Dependence India imports large quantities of crude oil, gold, electronics, and machinery. When global prices rise or the US dollar strengthens, India needs more rupees to buy the same goods — creating downward pressure on INR. 2. Trade Deficit If imports exceed exports, India needs foreign currency (mainly USD) to pay the difference. Higher demand for dollars lowers the value of the rupee. 3. Inflation and Purchasing Power Higher domestic inflation reduces the rupee’s purchasing power relative to other currencies and discourages foreig...
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