Rupee On The Brink of 90/Dollar as Market Awaits Rate Cut; Why Is The INR Struggling Despite GDP Growth?

Tough times for the Indian rupee as the national currency slipped to a fresh all-time low this week and is hovering dangerously close to the 90 per dollar mark.

At the time of writing, the rupee fell to 89.892 per US dollar, gaining 0.32% from Monday's low. In offshore markets, the currency briefly touched 89.9 per dollar, which hints at the possibility that it may breach the psychological level of Rs. 90 per USD.

The Indian rupee has depreciated about 4.8% so far in 2025 and is now Asia's worst-performing currency this year, according to data from Trading Economics.

Why is the rupee weak now?

Market participants say that Monday's sharp fall was mainly due to the maturity of large non-deliverable forward (NDF) positions, which exerted immediate selling pressure on the currency, according to Reuters.

The most puzzling aspect currently is that the Indian rupee is struggling despite India's outstanding GDP numbers for the second quarter. India reported an impressive 8.2% real GDP growth for the July-September 2025 quarter, which is the strongest pace since early 2024.

Economists point out several factors behind the rupee's continued decline, which include strong dollar demand from importers and corporates, along with persistent foreign portfolio outflows, which have further increased the currency's decline.

"The rupee's slide to a record low is mainly because of a mix of heavy import demand and delayed trade clarity, but the RBI's recent $1.9 billion FX sale, which pulled reserves down to about $687 billion, shows it remains firmly committed to containing volatility around the 88.8 level. Seasonally stronger December flows, soft inflation near 0.25%, and resilient domestic growth offer some support, yet October's record $41.7 billion trade deficit keeps the near-term bias tilted toward weakness," said Riya Singh, Research Analyst, Commodities and Currency, Emkay Global Financial Services.

"A brief test of 90 cannot be ruled out if external pressures persist, though active intervention should prevent disorderly moves." Singh further added.

According to Trading Economics, "Market sentiment has also weakened as India is currently one of the few major global economies without a trade agreement with the United States, lowering the expectations of tariff reductions and investment flows. Even India's strong Q3 GDP data failed to offer much support to the currency, as global risk-off sentiment and the absence of progress on US-India trade talks overshadowed domestic economic performance. "

RBI's Interventions In Recovery

The RBI has been actively managing this volatility in the domestic currency through calculated dollar sales. According to traders cited by Reuters, the Reserve Bank of India intervened in the spot market by selling dollars to make sure that the rupee did not slip below the crucial 90 mark.

Impact on Consumers and Businesses

The rupee's continuous decline has direct implications for Indian consumers and businesses. Import-heavy sectors, including electronics, fuel, capital goods, etc., are already facing higher costs.

Students studying abroad, international travellers, and even companies with dollar-denominated liabilities are experiencing a sharp rise in their expenses. Additionally, exporters and IT services firms earning in dollars may also see short-term gains.

RBI MPC Meeting: Rate Cut Expectations Rises

All eyes are now on the RBI MPC meeting, beginning tomorrow, with the policy announcement scheduled for December 5. The market is broadly expecting a 25 basis point rate cut, although the strong GDP print may influence the committee to maintain the status quo.

According to Mayur Modi, co-founder & co-CEO of Moneyboxx Finance Limited, "As the RBI Monetary Policy Committee convenes this month, all indicators point toward a favourable environment for a calibrated rate cut. Inflation has softened significantly, liquidity conditions have stabilised, and economic activity remains robust, creating an opportunity for the MPC to shift toward a more growth-supportive stance. A reduction in the repo rate could help ease financing costs, stimulate consumption, and strengthen investment sentiment across key sectors."

The weakness in the Indian rupee is also impacting the equity market. After recently touching record highs, both the Sensex and Nifty 50 have begun to surrender their gains as currency pressures weigh on investor sentiment.

At the time of writing, the Sensex was trading at 85,167.51, down 474.39 points or 0.55%, while the Nifty 50 stood at 26,031.85, lower by 143.90 points or 0.55%

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