The rupee slid nearly 6% in 2025, underperforming Asian peers amid tariffs, capital outflows and oil volatility, even as growth stayed strong.

The Indian rupee closed out 2025 as the weakest-performing major currency in Asia, sliding from 85.56 per dollar in December 2024 to around 90.72 by mid-December 2025—a depreciation of nearly 6%. The fall stood in contrast to gains seen in the Chinese yuan and several other regional currencies during the same period.

Market watchers attributed the pressure to a mix of U.S. tariff uncertainties, foreign investor outflows and sharp swings in global oil prices, all of which weighed on emerging market currencies. The slide also became a political talking point, with the Indian National Congress amplifying the issue through social media posts and videos, warning of inflationary risks and questioning the government’s economic management. Some of the campaign material, however, drew criticism for its tone.

Despite currency weakness, macro indicators offered a more nuanced picture. Exports rose 19% in November, economic growth remained above 7%, and foreign exchange reserves continued to cover nearly 11 months of imports, providing a cushion against external shocks.

A softer rupee can raise import costs and fuel inflation, but it may also support exporters by improving price competitiveness abroad. For households and small businesses, the immediate impact is felt through costlier fuel and imported goods. The broader challenge for policymakers will be to stabilise the currency without stalling growth—especially as global volatility shows little sign of easing.