Rupee At 10-Year Low, Oil Overheated: A Dangerous Mix For India?
The Indian rupee's trade-weighted valuation has fallen to its lowest level in over a decade, driven by soaring crude oil prices and heavy foreign investor selling. A further 5% depreciation could add about 40 basis points to inflation and shave 25 basis points off economic growth.
The Indian rupee has hit a 10-year low in trade-weighted valuation, amid rising crude oil prices and significant foreign investor selling. The rupee's 40-currency real effective exchange rate fell to 92.72 in March, below its long-term average of 98.25. Analysts attribute the decline to increased dollar demand from Indian importers and global risk aversion triggering equity outflows. The rupee has weakened around 4.5% this year and touched a record low against the US dollar in late March. A weaker rupee can boost Indian exports but raises import costs, especially for crude oil. The Reserve Bank of India has assumed an average dollar-rupee exchange rate of 94 for FY27.
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