Pak Rupee Strengthens | Indian Rupee Falls Fastest in Asia; Expert Insights

The Indian Rupee is falling the fastest in Asia against the Dollar. It has dropped more than 6% in the last 5 months. Whereas during the same period, the Pakistani Rupee strengthened by 0.5% and the Chinese Yuan strengthened by 3%. See the situation of other countries below-

Before moving ahead, let’s understand the relationship between the Dollar and Rupee-

There is a market in the world – the Forex Market, meaning the currency market. This market doesn’t operate in any one building. It runs digitally, where banks, investment firms, export-import companies from around the world buy and sell currencies.

The most basic principle of economics is – the higher the demand, the higher the price.

88% of the world’s business is conducted in dollars. So all countries would want to hold dollars. Due to this, out of all the foreign currency that all countries have, about 57% is dollars. That’s why the dollar has been accepted as the global currency in the cash market. Now, based on this, the currencies of other countries are measured and assessed.

Currently, there is very high demand for dollars in the cash market. In India too, more dollars are being spent than are coming in. That’s why the rupee is falling rapidly. At this time, 1 dollar is trading at around 95 rupees.

This was the simple definition. Now know those factors due to which the rupee fell so rapidly…

1. Crude oil prices increased, had to spend more dollars

• India purchases more than 85% of its consumption oil from foreign countries. Its payment can only be made in dollars. Oil ranks first with a 22% share in the country’s import bill.
• During the Iran war, crude oil prices rose from $72 to $126 per barrel. On June 3 also, the price is at $88.7.
• According to credit rating agency ICRA, when crude oil prices increase by $10, India’s import bill faces an additional burden of $14-16 billion. The rupee weakened due to the need for more dollars to purchase oil.

2. Foreign investors withdrew dollars from India indiscriminately

• Foreign investors invest money in India in two ways. First – through FII (Foreign Institutional Investor) in the stock market. Second – directly through FDI (Foreign Direct Investment) in companies, businesses or infrastructure.
• In 2025, foreign investors withdrew 1.66 lakh crore rupees from the Indian stock market. In just the first 5 months of 2026, they have already withdrawn more than 2.26 lakh crore rupees.
• Foreign investors withdraw money from the stock market in dollars. This increases the demand for dollars in the market, which causes the rupee to fall.
• Economist Dr. Sharad Kohli says that since September 2024, foreign investors have been withdrawing money from India after making profits. The PE ratio of the Indian stock market is higher than other emerging markets. PE ratio means how many rupees an investor is investing to earn one rupee.
• Similarly, FDI is a major source of dollars coming into the country. India also invests abroad in dollars. The difference between dollars coming into India through FDI and dollars going out, i.e., net FDI, was 28 billion dollars in 2022-23, which has decreased to just 1 billion dollars in 2024-25. This means the inflow of dollars into India has reduced.
• Due to these reasons, the Indian stock market has dropped directly from fourth to seventh position in global rankings. According to National Securities Depository Limited data, foreign investors have withdrawn as much money as they invested over the past 10 years.

3. Speculation about rupee falling caused the rupee to fall further

• Economist Dr. Jayati Ghosh believes that domestic traders are repeatedly speculating that the rupee will fall further. They are betting on this. Due to these speculations, the rupee is continuously declining.
• Economist Prof. Arun Kumar explains that due to domestic speculation, Indian exporters have held back their dollar earnings abroad. They expect the rupee to fall further, which would give them more rupees in exchange for dollars. Meanwhile, Indian importers are buying more. They fear that goods will become more expensive if the rupee falls.
• Experts say that due to these speculations, foreign investors and Indians living abroad, i.e., NRIs, are also withdrawing money deposited or invested in the country.

4. Lack of confidence in the Indian economy

• Economist Prof. Arun Kumar explains, ‘After Donald Trump took office, a tariff of up to 50% was imposed on India. The International Monetary Fund, i.e., IMF, raised questions on India’s GDP calculation. Due to these factors, investors’ confidence in the Indian economy decreased. That’s why fewer dollars are coming into India.’

Apart from this, there has also been a surge in the ‘Dollar Index’. The Dollar Index shows the position of the US dollar against 6 major currencies – Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. After the Iran war started, it reached 99 from 97.6. In between, it also crossed 100. This means that the demand for dollars has increased worldwide, due to which the dollar is strengthening.

On May 25, Union Finance Minister Nirmala Sitharaman said, ‘Looking at the current global situation, we need to focus on 3F- Fuel, Fertilizer and Forex.’

This raises the question- When China-Pakistan’s currency strengthened, where is India falling short?

Between 2004 to 2014, that is in 10 years, the rupee fell from 45 to 59 against the dollar, meaning it fell 31.1%. On average, about 3% decline every year. Whereas after 2014, that is in the last 12 years, the rupee crashed 61%. That means it fell an average of 5% every year.

Experts believe that the Indian government is making roughly 3 mistakes…

1. No investment in new technology, then where will the earnings come from?

• There is a revolution of AI and new technology happening worldwide. America is spending 500 billion dollars on AI and China 80 billion dollars, while India is spending only 2 billion dollars.
• This difference is also visible in the stock market. The markets of America, China and other countries are rising, while India’s market is taking hits.
• The reason for this is – ‘low spending on Research and Development (R&D)’. India spends only 0.65% of its GDP on R&D. Whereas China and America spend around 3%.
• In simple words, China’s economy is 5 times bigger than ours, but it spends 22 times more on research. America with an economy 20 times bigger spends 100 times more.
• Prof. Arun Kumar says that when new technology won’t be created, what will we sell to the world? When we won’t sell, where will the dollars come from? In such a situation, the government should spend more on R&D. A research environment should be created in institutes and universities. Along with the government, the private sector should also increase spending on R&D. Otherwise, they will suffer heavy losses in the AI era.

2. Without technology, how will more goods be produced?

• Due to lack of better technology, India is far behind in manufacturing, that is, in making goods. Because of this, India has become a consumer market.
• Dr. Kohli says, the government started ‘Make in India’ to promote manufacturing, but its lion roared slowly. Meanwhile, the start-ups or businesses that are starting are mostly service and app-based. Such as- delivery apps, e-commerce apps, maid services. These are useful, but foreign currency cannot be earned from them.
• More dollars come into the country when we make something and sell it to the world- whether it’s an electric socket or a fighter jet engine.
• Dr. Kohli advises that the government should provide training to children in making electronics, textiles, or other products right from school-college level. Additionally, both the government and private sector should work together to build manufacturing infrastructure.

3. If more goods are not produced, what will we sell?

• The biggest problem in not getting more dollars is this. In 2025-26, India sold goods worth 860 billion dollars, but bought goods worth 979 billion dollars. That means a deficit of 119 billion dollars.
• India sells mostly petroleum products (petrol-diesel), gold-silver jewelry and medicines to foreign countries, but the profit margin in these is low. Whereas in items that have higher profit margins, such as electronics, machinery, auto parts etc., India lags far behind. China, Vietnam and Taiwan are ahead in this.
• Both Prof. Arun and Dr. Kohli believe that if the rupee has to be kept strong for a long time, then the government will have to strengthen exports and related policies.
• There are also logistics issues, meaning difficulties in delivering goods. India ranks 38th in the World Bank’s Logistics Performance Index. This is because the customs clearance process at borders and ports, despite being digital, is not as fast as in developed countries. Expressways and large ports have been built well, but connectivity of villages or tier-2 cities to highways is still not adequate.
• However, the government has started 2 dedicated freight corridors, while work is ongoing on 3 others. It is hoped that this will reduce delays in freight transportation.

What is RBI doing right now to stop the falling rupee?

• The responsibility for the country’s economic condition lies with the Reserve Bank of India, i.e., RBI. Whenever the rupee falls, RBI sells dollars or treasury bonds from its foreign exchange reserves in the market to stabilize it. This increases the demand for the rupee and slows down the decline. This is called a rupee-dollar swap.
• In 2025-26, RBI sold $53.1 billion, which was approximately $12 billion more than the previous financial year. On May 21, 2026, RBI sold at least $2 billion and on May 26, $5 billion.
• Prof. Arun believes that the rupee should never be allowed to fall rapidly and for this, RBI should intervene. If this doesn’t happen, market speculators will push the rupee down even further. Production and investment will decline. This will create chaos in the economy.
• According to Dr. Kohli, RBI observed that the rupee could cross the 97 mark. To prevent this, it sold dollars. Because psychologically and politically, the fall of the rupee is not considered good and this could become an issue. In such a situation, RBI might sell more dollars.
• Due to this, RBI’s foreign exchange reserves have reached the lowest level in the past one year. According to data released on May 22, RBI’s foreign exchange reserves have come down to $681.4 billion, which was more than $688.89 billion last week. However, with these reserves, expenses for 10 months can be managed.

Can the rupee touch the 100 mark soon?

• The Chairman of the 16th Finance Commission and economist Arvind Panagariya has even advised the RBI to let the rupee fall to 100. He believes that whether the oil shortage is temporary or long-term, letting the rupee fall would be the most practical solution. 100 is just a number, like 99 and 101.
• Dr. Ghosh says that letting the rupee fall to 100 is not a good thing. Because this will increase the prices of crude oil, gold, and many other things for us. Some people think that the fall of the rupee will increase India’s exports. This thinking is outdated. They should understand that India is an import-driven economy, meaning we buy and consume much more than we sell goods. Meanwhile, the RBI and government should take concrete steps for this.
• Dr. Kohli believes that the rupee reaching 100 depends on where oil prices will stop, whether foreign investors will return to India, how much money NRIs will send to India through money orders, and for how long and how much dollars the RBI will sell to stabilize the rupee.