By Sanskriti Global Exports by Himanshu Gupta

Navigating the Storm: Rupee Breaches 90/USD – What India's Traders Must Do Now

December 3, 2025 – The psychological barrier has been breached. In a development that has sent tremors through India's trade community, the Indian Rupee (INR) has fallen past the 90 mark against the U.S. Dollar for the first time in history. This milestone is not just a number on a trading screen; it is a critical inflection point for every business engaged in cross-border trade. Driven by a perfect storm of a record-high trade deficit, aggressive U.S. tariffs, and accelerating capital outflows, this new currency reality demands immediate strategic reassessment from both importers and exporters.

As a senior trade analyst, my role is not to sensationalize this event but to deconstruct it, offering clear-eyed analysis and actionable intelligence. The volatility we are witnessing is not a fleeting crisis but an evolution of the global economic landscape. Understanding the underlying forces is the first step toward navigating this new, challenging terrain and protecting your bottom line.

The Anatomy of the Plunge: A Factual Summary

The recent Reuters report confirms what many in the market have been fearing. The Rupee's sharp depreciation is not a result of a single factor but a confluence of three powerful headwinds hitting the Indian economy simultaneously.

1. A Widening Trade Chasm: The primary catalyst is the merchandise trade deficit, which ballooned to an all-time high in October. The two main drivers were a sharp, unexpected surge in gold imports and the biting impact of U.S. tariffs. The festive and wedding season predictably increased demand for gold, but the scale of imports suggests a deeper trend: investors and households are flocking to the precious metal as a safe-haven asset, hedging against currency depreciation and domestic inflation. Simultaneously, steep U.S. tariffs, reportedly targeting key Indian sectors like engineering goods, electronics, and textiles, have made exports to one of our largest markets less competitive, dampening export revenues while our import bill swells.

2. The Great Capital Retreat: Compounding the trade imbalance is a sustained outflow of foreign capital. Foreign Portfolio Investors (FPIs) have been net sellers in Indian equity and debt markets for consecutive months. This capital flight is largely a response to rising interest rates in the United States, which makes dollar-denominated assets more attractive. Global risk aversion, fueled by geopolitical uncertainty and concerns about emerging market stability, has led investors to pull funds from markets like India in a classic 'flight to safety'. Every dollar pulled out by an FPI adds to the demand for dollars, further pressuring the Rupee.

3. RBI’s Balancing Act: The Reserve Bank of India (RBI) is caught in a difficult position. It has likely been intervening in the forex market, selling its dollar reserves to slow the Rupee's slide. However, these reserves are finite, and aggressive intervention can deplete them rapidly. The central bank also faces the dilemma of raising interest rates to attract foreign capital, a move that could stifle domestic economic growth at a fragile time. The market is now watching the RBI's next move with bated breath, but its capacity to single-handedly reverse the trend is limited.

Implications for Indian Import-Export Professionals

For the business on the ground, these macroeconomic trends translate into tangible operational challenges and opportunities. Here is a breakdown of what the 90/USD Rupee means for you:

For Importers:

• Immediate Margin Compression: This is the most direct impact. The landed cost of all imported goods and raw materials—from crude oil and electronic components to machinery and chemicals—has increased overnight. This directly squeezes profit margins, especially for businesses operating on thin spreads with pre-existing sales contracts priced in Rupees.
• Input Cost Inflation: Businesses reliant on imported components for domestic manufacturing (including those under the 'Make in India' banner) will face significantly higher production costs. This will either force price hikes for end consumers, risking a drop in demand, or necessitate absorbing the costs, further eroding profitability.
• Urgent Need for Hedging: Companies that have not implemented a robust currency hedging strategy are now dangerously exposed. Forward contracts, currency options, and other derivatives are no longer a luxury but a fundamental tool for survival to lock in costs and mitigate future volatility.
• Contract Renegotiation: Importers with long-term supply agreements priced in USD will need to engage with their suppliers. Exploring options for dynamic pricing, partial Rupee invoicing, or extending credit terms will be crucial conversations in the coming weeks.

For Exporters:

• Enhanced Price Competitiveness: A weaker Rupee makes Indian goods and services cheaper for foreign buyers. This presents a significant opportunity to gain market share against competitors from countries with stronger currencies. Exporters in sectors like IT services, pharmaceuticals, textiles, and agricultural products could see a surge in demand.
• Increased Rupee Realizations: For every dollar earned, exporters will now receive more Rupees. This top-line boost can significantly improve profitability, provided the gains are not entirely offset by the rising cost of imported inputs within their own supply chain.
• The Double-Edged Sword of Imported Inputs: Many Indian exports have a high import intensity (e.g., gems and jewellery, electronics assembly). While the final product is more competitive, the cost of raw materials has also risen. Exporters must conduct a thorough cost-benefit analysis to understand their net gain.
• Risk of Buyer Demands: Sophisticated international buyers are aware of the currency dynamics. They may pressure Indian exporters for discounts, arguing that the currency depreciation provides a windfall profit. Exporters must be prepared to defend their pricing and justify it based on rising domestic input costs and inflation.

Conclusion: The Path Forward is Proactive Strategy

The Rupee at 90 to the dollar is a stark reminder of India's integration into the volatile global economy. Viewing this as a temporary anomaly would be a mistake. This is a new paradigm that requires a fundamental shift from reactive crisis management to proactive, strategic risk management.

For importers, the focus must be on cost optimization, supply chain efficiency, and sophisticated financial hedging. For exporters, the imperative is to leverage the competitive advantage without giving it all away at the negotiation table, while also managing the backend costs. For all, diversifying markets beyond over-reliance on single currency blocs and exploring Rupee-based trade agreements where possible are no longer abstract ideas but pressing strategic goals.

The storm will not pass quickly. The resilient businesses will be those that accept this new reality, adapt their strategies, and build robust financial and operational frameworks to withstand the enduring volatility. The time to act is now.

Source: Original