Sunday 31 / August / 2025
Muscat: First time in history, the Indian Rupee hit a new record low of 88.29 against the US dollar, surpassing its prior record of 87.95, set in February. The Rupee on Friday had opened at 87.65 and closed at 88.18 by the end of the trading session.
Exchange Houses in Oman are offering up to 228 for one Omani Rial.
Speaking to Times of Oman, R. Madhusoodanan, a financial expert based in Muscat said that this was the after-effect of the additional tariff imposed by the Trump administration against India. The additional tariff on Indian goods imported to the US has created turbulence on India’s export to the US. Undoubtedly, large sectors are worried about the additional tariff which made Indian goods less competitive to others in the US.
The above has created negative sentiments in foreign investors and the Indian stocks witnessed outflows to the tune of more than 32000 crore in August 2025 itself. This has put pressure on the Indian Rupee. Coupled with this, the month-end pressure on banks accelerated the fall. The RBI intervention helped the market to restrict the fall and finally it closed at 88.12 levels.
Impact on Indian economy
India spends a sizable amount of forex on crude imports, gold, electronic goods among other items. Rupee depreciation makes imports costlier besides widening the trade deficit. This will also fuel the inflation in the country. The RBI, which has paused the rate cuts, may either continue the status quo or increase the rates, if the inflation data go above the comfort level.
This may again adversely affect the flow of affordable credit to needy sectors particularly manufacturing, pharma, housing, agri etc. The Q1 (April-June) growth for 2024-25 is at 7.8 percent which beats the estimates. To continue the growth, several measures needed to boost domestic production at globally competitive rates to face the uncertainty created by the tariff turmoil.
The government’s assurance to stand firm with the affected sectors may be taken at face value.
Government to explore the possibility of regulating the import of items like gold etc., to preserve the forex in the current situation. $58 billion was spent in 2024-25 for gold imports. The government had reduced the basic customs duty (BCD) of gold from 15 per cent to 6 percent last year. The forex reserve of the country has dropped to $ 4.38 billion and stood at $690.72 billion as on 22/8/2025. The plus point is that rupee depreciation may result into increased foreign inward remittance by NRIs.
Outlook
In the short term, rupee is likely to continue the pressure due to the export concerns to the US and the stock outflows. It is a fact that the rupee has depreciated by 3 per cent during the current year. Though the depreciation has been slightly above compared to the peers in the Asian region, there is nothing much to worry. India has since started initiatives to reduce the dependence on the US dollar in international trade.
The local currency settlements have begun to reduce the vulnerabilities. The present tariff is not going to be the final one in view of multiple reasons. The INR movement is expected to be range bound, higher volatility is expected in the short term, R. Madhusoodanan said.
