The Indian Rupee (INR) likely approaching levels of around 100 to the US Dollar (USD) in the coming weeks has sparked unnecessary alarm in certain circles. Headlines scream crisis, opposition voices target the Modi government and social media amplifies fears of economic collapse. Yet, a closer look at economic history, fundamentals and global context reveals this as a largely routine adjustment rather than any policy failure.
The Rupee has depreciated at an average rate of roughly 4-6% per year over decades due to structural factors like inflation and interest rate differentials. India’s robust foreign exchange reserves, strong GDP growth and external balances under the Modi government provide a solid buffer. Panic is unwarranted and politicizing currency movements distracts from long-term reforms that PM Modi is committed to.
Constituents of India’s forex reserve
India’s foreign exchange (forex) reserves stand at a hefty $688.89 billion as of the week ending May 15, 2026. The Reserve Bank of India (RBI) manages these funds, which are composed of multiple assets to safeguard the economy and ensure import cover. The total reserves are distributed across the following key components: Foreign Currency Assets (FCA) of $551.89 billion, Gold Reserves of $115.00 billion, Special Drawing Rights (SDRs) of $18.78 billion and Reserve Position in the IMF of $4.86 billion.
Currency depreciation is not new for the Indian Rupee. In 1947, at independence, 1 USD was worth about 3.3 INR. By the early 1990s, it had crossed 17, reached around 45 by 2000, hovered over 60 when the Modi government took over in 2014 and now stands around 95-96 levels against USD, as of May 2026. This reflects a consistent, long-term trend driven by productivity gaps and the dollar’s status as the global reserve currency. So, Rahul Gandhi and others from the Opposition who are crying foul are doing so needlessly.
Annual depreciation of 4-6% is normal
Annual depreciation has averaged 4-6% in many periods. For instance, from 2014 to around 2024-25, the move from 60 to 83-85 represented cumulative weakening consistent with this pace. Recent pressures pushed it towards 96, but this is not unprecedented volatility. Also, the recent pressure on INR has mostly to do with the West Asia crisis which has lingered on, leading to an impasse around Strait of Hormuz, which has obviously impacted oil importing countries like India far more disproportionately than others in the region due to supply disruptions. INR depreciation is certainly not the result of any domestic policy glitches.
If anything, the Modi government has managed the entire fallout of the Middle-East crisis very astutely, by shielding the middle class with only marginal, calibrated price increases of petrol and diesel.
Incentives to shift from LPG to PNG and diversifying our Crude Oil and LNG imports from 27 to 41 countries have held us in good stead. In fact, major INR depreciations occurred under erstwhile Congress regimes in 2008 (global financial crisis) and 2011-13 (taper tantrum), often sharper than current trends.
India doesn’t have a fixed exchange rate
Critics often ignore that post the 1991 liberalization, the Rupee transitioned from a fixed to a market-determined regime. The RBI manages volatility but does not peg it artificially. A rigid defense of an overvalued currency would drain reserves and distort exports, as seen in pre-reform India under successive erstwhile Congress regimes. Gradual depreciation has coincided with India’s rise as a major economy.
Nominal GDP has grown massively and per capita income has risen despite (or alongside) currency adjustment in the last 12 years under PM Modi. Wages and asset prices in INR terms have adjusted upward, cushioning many impacts. From 2011 (45-50 INR/USD) to now (96), the Rupee lost over 100% in nominal terms against the dollar, yet India’s GDP per capita roughly doubled nominally in that period. And much of that rise in per capita GDP happened under Modi. This underscores that depreciation does not necessarily equate to economic decline as is commonly and wrongly perceived.
Real effective exchange rate has been managed well
India’s average inflation (often 5-7% or higher in past decades) exceeds the US (2-3%). Purchasing Power Parity (PPP) theory suggests the Rupee should weaken to maintain competitiveness. Of course, in the recent past many traditional metrics have changed. Today, India’s retail inflation is 3.48% and GDP growth is over 7%, while the US has GDP growth of 1.6%, with inflation at 3.6%. There was a time not too long back when the US would struggle to achieve even 2% inflation.
India’s real effective exchange rate (REER) has been managed reasonably, avoiding chronic overvaluation under the Modi government. India runs persistent trade deficits, especially in oil (85% imported). Higher global crude prices increase dollar demand. Services exports (IT, remittances), however, provide a cushion, keeping the current account deficit (CAD) manageable at sub 1% of GDP.
Gross FDI inflows remain healthy
FPI outflows during risk-off periods (US rate hikes, geopolitical tensions like Middle East conflicts) strengthen the dollar. In 2026, factors like oil prices shooting above $100/barrel amidst tensions, US policy uncertainty and tariff issues contributed. Yet, FDI remains relatively stable and India attracts long-term investment due to its growth story, with our gross FDI inflows at a hefty $95bn in FY 2025-26.
Emerging economies often see depreciating currencies. This is not unique to India. The Rupee’s movement helps maintain export edge in textiles, pharma, gems and IT. The Modi government’s era has seen improvements– forex reserves more than doubled from $341 billion in FY15 to between $689-728 billion by 2026, providing 11-12 months of import cover. CAD narrowed significantly. External debt to GDP ratio remains moderate at 19.4%. These buffers allow orderly adjustment rather than crisis.
So even if INR were to touch 100, that is no reason to panic. Looking at the INR in isolation is a fallacy. A level of 95, 96 or 100 means nothing, unless there is a proper context. Today, with a fiscal deficit of 4.4%, CAD at less than 1% and retail inflation at less than 4%, India is in an enviable position, with strong macros.
Rupee depreciation has many benefits–Indian goods become cheaper abroad; exporters in SMEs, manufacturing and services gain; Pharma, IT and agriculture benefit from higher INR realizations. During global slowdowns, this also supports jobs and growth. NRIs send more valuable rupees home. Inbound tourism becomes attractive. Imports turn costlier, encouraging local production. It discourages excessive reliance on foreign goods. While imported inflation (oil, electronics) rises, RBI’s tools and domestic factors moderate it. India’s inflation has been relatively controlled, compared to massive spikes witnessed in the developed world. Studies show net positive effects for export-oriented sectors when depreciation is gradual. Sharp falls may hurt, but 4-6% annual moves are absorbable and provide a big export-led impetus, evident from the record $864bn worth of exports that we saw, for instance, in FY2025-26.
India’s growth story remains intact
India’s economy grew at 7.3-7.6% in recent years despite depreciation pressures, outpacing most major economies. This resilience stems from domestic consumption, reforms (GST, insolvency code & labor laws), digital infrastructure (UPI, Aadhaar) and infrastructure push. RBI intervenes judiciously, using reserves sparingly. Despite global fuel price volatility, thanks to our strategic petroleum reserves, renewable push (solar capacity, EVs) and diversification of imports, our external finances are in fine fettle. Forex reserves act as a shock absorber.
Compared to the 1991 crisis (reserves near zero), today’s position is vastly stronger. Inflation pass-through is partial; not all costs transmit fully due to domestic competition and efficiency gains. GDP growth absorbs much of the impact. The Rupee often outperforms or matches other emerging market (EM) currencies in stability. Turkish Lira, Argentine Peso, or Brazilian Real have seen far sharper volatility and hyper-depreciation in the last 2-3 years.
Even Asian peers like the Chinese Yuan or Indonesian Rupiah have faced pressures at various points in the recent past. India’s fundamentals, namely demographics, reform momentum and democratic stability have all combined to support relative currency resilience.
In 2026 the Rupee weakened but without the panic seen elsewhere. Depreciation occurred under every regime post-independence. Congress-era saw major devaluations (1966, 1991). The Modi government inherited a fragile economy in 2014 (high CAD, high inflation, low reserves growth relative to needs) and depleted macros. Improved ease of doing business, exports’ diversification (electronics, defence), formalization and digitization with reduced leakages and stable macro policies avoiding populism traps, have been excellent measures by the Modi government.
Opposition criticism often cherry-picks nominal exchange rates without context of real growth, reserves, or global headwinds (Trump tariffs, wars, Fed policies). Currency is market-driven; governments influence via policy, not direct control. Politicizing it fuels anxiety, potentially triggering self-fulfilling outflows. Reaching 100 INR/USD is plausible but not catastrophic if orderly. India’s nominal GDP ranking fluctuates with exchange rates (6th nominally, 3rd in PPP), but real progress matters more. Projections show India as the 3rd largest economy soon, with strong growth continuing.
Structural reforms addressing productivity, skills and labor markets will reduce depreciation pressure over time by boosting competitiveness and the Modi government is fully committed to that. Rupee’s path to 100 or beyond represents continuity in a developing economy’s journey, rapidly adjusting to global realities while growing steadfastly.
India’s story under Modi includes lifting 25 crore people from multi-dimensional poverty, infrastructure boom, digital leap and macro stability amidst global Black Swan events like COVID, Russia -Ukraine conflict and the Hormuz crisis.
Nervousness stems from misunderstanding economics or from political opportunism, something India’s debilitated Congress Party is adept at. Gradual depreciation is normal, often beneficial for competitiveness and indeed manageable, with strong fundamentals. Instead of targeting the Modi government, Atmanirbhar Bharat, which is all about self-reliance and resilient integration with the world, is something that should be applauded. The Rupee will fluctuate, but India’s trajectory points upward, with macroeconomic stability being the foundational premise of ‘Modinomics’. Economic maturity demands viewing currency as a tool, not a totem of success or failure.
(Sanju Verma is an Economist, National Spokesperson of the BJP and the Bestselling Author of ‘The Modi Gambit’.)
Views are personal and do not represent the stand of this publication.
