India’s rupee has recently crossed significant psychological thresholds, falling past 90 per US dollar and sparking widespread concern among households, businesses, and policymakers. This slide is not just a market event; it reflects deeper structural and cyclical forces that have implications for inflation, growth, and financial stability. The Reserve Bank of India (RBI) stands at the centre of efforts to manage this volatility, deploying a mix of market operations, regulatory tools, and strategic communication to prevent a currency crisis from becoming a broader economic shock. Declining Rupee The Rupee’s Fall: Symptom and Signal The rupee’s weakness is driven by a combination of global and domestic factors. A strong US dollar, rising American interest rates, and global risk aversion have pushed investors toward safe-haven currencies, dragging down emerging-market currencies like the rupee. Domestically, India’s persistent current account deficit—fueled by heavy imports of crude oil...
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