New Delhi: Since April 2, 2025, when the US announced sweeping tariff hikes across economies, the Indian rupee (INR) has depreciated by 5.7 per cent against
USD (most amongst the major economies), notwithstanding sporadic phases of appreciation owing to optimism over the US-India trade deal.
While INR is the most depreciated currency, it is not the most volatile, said the report from SBI’s Economic Research Department.
“This clearly indicates that the 50 per cent tariff imposed on India is one of the major factors behind the current phase of rupee depreciation,” it said.
It further said that the days of largesse flows is over as geopolitical uncertainties have taken centre stage.
Past trends suggest that during CY07-CY14, net portfolio inflows averaged USD 162.8 billion, while from CY15-CY25 (till date), portfolio inflows have been much lower at USD 87.7 billion.
The abundance of portfolio inflows prior to CY14 was the primary reason for rupee movements, the research report said.
“Such a luxury is absent now as geopolitical uncertainties driven by the delay in the trade deal have been the single most important reason… India’s trade data shows the remarkable resilience in navigating through prolonged uncertainty, more protectionism and labour supply shocks,” it said.
While the geopolitical risk index has moderated since April 2025, the current average value of the index for April-October 2025 is much greater than its decadal average, which indicates how much pressure global uncertainties are exerting pressure on INR, said the report titled ‘In rupee we TRUST!’.
“Consistent with our empirical analysis, the rupee is currently in a depreciating regime…the rupee is likely to exit regime…Thereafter, we believe that the rupee is likely to bounce back strongly in the second half of next fiscal,” the SBI study said.
After breaching the psychologically important mark of 90 per US dollar, the rupee, in a span of just a few days, crossed the 91-level on Tuesday.
It took only 13 days for the domestic currency to cross from 90 to 91 per dollar. However, the rupee staged a sharp recovery on Wednesday and ended 55 paise higher at 90.38 against the greenback.
India’s forex reserve reached USD 703 billion in June 2025, but declined to USD 687.2 billion during the week ended December 5, 2025, which is primarily due to capital outflows and the likely intervention by the RBI in the forex market to curb the volatility in the exchange rate.
As per the latest available data, the report said that the RBI has intervened with around USD 18 billion in the forex market during June-September.
