Last week, the Indian rupee depreciated by 8-10%, the State Bank of India reports as Donald Trump has been elected as the 47th U.S. President. Currently, one Indian rupee is worth 1.2 cents in United States dollars. The Times of India reports that the exchange rate will be 84.38 rupees per dollar, an all time low as Trump returns to the White House. Policy Circle, a digital platform covering policy issues, environment, and society from India which launched in 2020 states that “for an import-dependent country like India, a depreciating rupee translates into higher import bills, which, combined with elevated oil prices, is likely to exacerbate inflationary pressures.”
While the Indian rupee is becoming weaker, the U.S. dollar is getting stronger. Another report from Business Today, an Indian business magazine founded in 1992, shows that the Indian rupee is expected to depreciate further between 84.20-84.50 per dollar in the next two to three months and between 84.50-84.85 per dollar in the first half of 2025. According to The Hindu Times, Trump`s victory will introduce challenges such as increased tariffs and H-1B restrictions which will coerce India into diversifying its export markets, expanding its manufacturing industry, and enhancing economic self-reliance.
India is getting ready to weaken the rupee in conjunction with the Chinese yuan. According to Bloomberg, “India’s central bank is ready to let the rupee weaken in tandem with the Chinese yuan after Donald Trump’s election win spurred fears of higher [U.S.] tariffs, according to people familiar with the thinking of policymakers.” According to The Economic Times, Global Macro Strategist in the E.M.E.A. region (Europe, Middle East, and Africa) Arnab Das says the rupee is depreciating because of outflows, cause, and effects with currency markets. He also explains that “when the [U.S.] has imposed tariffs in the past, the dollar has strengthened and other currencies have weakened and that is exactly what the theory would tell you and that is a big part of what is going on in the global currency markets.”
Trump has policies for U.S. growth that are affecting currencies in two continents. Reuters reports, “Trump’s policies of tax cuts and deregulation are likely to lift U.S. growth, prompting investors to prefer the dollar to the other currencies, analysts said, adding that the threat of tariffs is likely to undermine euro and Asian currencies.”
Overall, the Indian rupee’s further depreciation is highly plausible with a second Trump administration right around the corner. This depreciation will result in higher import bills and high oil prices which will – if Trump follows through with his increasing tariffs – not only affect India`s currency, but currency markets around the world. The growing strength of the U.S. dollar is also causing the Indian rupee to depreciate. India might also seek to depreciate the Indian rupee in tandem with the Chinese Yuan. Ultimately, it is likely that the give-and-take of global economic factors and political decisions will create a challenging environment for the Indian rupee with far-reaching implications for trade and inflation.
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