Rupee Weakness 2025: Record Low of 88.6 Per Dollar Explained
Why in the news
The rupee kept setting new lows through September 2025, with the weakest reading of 88.6 per dollar on 23 September.
Causes
- Trade imbalance: stagnant exports; heavy oil (about 85% dollar-priced), electronics and fertiliser imports widen the CAD.
- Weak inflows: sluggish FPI and FDI; net FPI outflow of $1.5 bn.
- Strong global demand for USD, US returns pulling capital, and GDP growth near 6.1% in Q1 FY26.
Impact
| Negative | Positive |
|---|---|
| Import inflation; heavier unhedged ECB repayments | Cheaper Indian exports |
| Wider CAD; costlier education, travel, medical care abroad | Gains for NRIs; local manufacturing push (Atmanirbhar Bharat) |
Policy response
- RBI: avoids aggressive defence to conserve reserves.
- Government: PLI schemes, ethanol blending, IMEC, National Logistics Policy, BRICS+ local currency trade with UAE and Russia.
Way forward
- Boost exports through high-value manufacturing and FTAs.
- Diversify energy: renewables, green hydrogen, ethanol.
- Attract long-term capital; deepen bond markets; promote rupee invoicing.
Exam angle
- Record low: 88.6 on 23 September 2025; reserves: $570 bn.