India’s rupee emerges weakest in markets amid currency crisis

India’s rupee currently stands as the worst-performing emerging market currency in 2025, a consequence of President Trump’s aggressive 50 percent tariffs—an unprecedented move that has triggered widespread capital outflows and severe export challenges for Asia’s third-largest economy

Tariffs and Export Pressures

The U.S. has raised tariffs on Indian goods to a staggering 50 percent—doubling the previous reciprocal tariff—hitting over 55 percent of India’s exports to the U.S., including textiles, gems, jewelry, seafood, leather, and more. Experts advise these punitive duties pose an existential threat to export competitiveness, especially in labor-intensive sectors and SMEs, risking collapse in market share and job losses

Capital Flight and Market Response

Fear and uncertainty have prompted a quick withdrawal of foreign capital—financial outflows from Indian equities have spiked significantly, exacerbating rupee depreciation. The rupee has tumbled to record lows near Rs 88.3–88.33 per U.S. dollar, with market participants pointing to tariff-induced evaporation of investor confidence

Macro Pressures and RBI’s Role

The widening trade deficit and shrinking current account surplus have compounded external pressures; India posted a current account deficit of $2.4 billion in Q1 FY26—fueled by a growing merchandise trade gap while services and remittances provided limited relief The resulting strain on forex stability has placed the Reserve Bank of India under pressure, prompting interventions like offsetting intraday volatility ,yet analysts indicate that stabilizing moves may only offer temporary respite

Growth Implications and Economic Resilience

Despite the turbulence, India’s GDP growth outlook remains moderately optimistic. Fitch projects about 6.5 percent growth in FY26 though analysts caution that sustained tariffs could shave 0.6–1 percentage points from growth figures. Critics argue that while the economy's strong domestic demand and services sector may support the blow, export-intensive industries and SMEs face disproportionate risks.

What’s At Stake and What Comes Next

From an expert’s viewpoint, the currency crisis facing India reflects a complex intersection of geopolitical friction and economic vulnerability. President Trump’s "aggressive 50 percent tariffs" have clearly destabilized the rupee, prompted quick investor outflow, and weighed heavily on export sectors,confirming the rupee’s ranking as the weakest in the emerging market cohort .While India’s economic fundamentals such as growth projections, domestic demand, and service-sector strength offer critical buffers, the path ahead hinges entirely on diplomatic and trade recalibration. Unless U.S.–India tensions ease, the rupee will remain under sustained pressure, deepening risks for growth and financial stability.

(Business Correspondent)