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Rupee Slide Past 90: Why SBI Research Says It's Not a Weakness

SBI Research has a reassuring take on the rupee sliding past 90 against the dollar. They argue this isn't a sign of India's economic weakness but is instead driven by global factors. Key reasons include uncertainty around a US-India trade deal and foreign investors pulling money out after two strong years. The report also notes that nearly $45 billion of Indian exports could be directly hit by recent US tariff hikes.

Key Points: SBI Research Says Rupee Slump Driven by Global Factors, Not Weakness

  • Rupee's 5.5% fall since April driven by US tariff hikes and trade deal delays
  • Report cites RBI's stance of avoiding excessive market intervention as a factor
  • India's trade deficit only slightly wider, suggesting negative sentiment is oversold
  • Nearly $45bn in Indian exports, especially labor-intensive goods, face direct US tariff impact
2 min read

Sliding rupee not a sign of weakness, driven by global uncertainty: SBI Research

SBI Research explains the rupee's fall past 90/USD is due to US trade uncertainty and global outflows, not weak Indian economic fundamentals.

"The recent depreciation is driven largely by global uncertainty, delays in the US-India trade deal, and foreign portfolio outflows - SBI Research Report"

New Delhi, Dec 4

The rupee may have slipped past the psychological barrier of 90 against the US dollar, but this slide is not a sign of weakness, a new SBI Research report said on Thursday.

The data compiled by the SBI Research said that the recent depreciation is driven largely by global uncertainty, delays in the US-India trade deal, and foreign portfolio outflows -- rather than any deterioration in India’s economic fundamentals.

According to the report, the recent fall in the rupee has been mainly driven by three factors -- uncertainty around the India-US trade deal, foreign portfolio outflows from equities after two strong years of inflows, and the Reserve Bank of India’s clear stance of avoiding excessive intervention in the currency market.

At the same time, the offshore non-deliverable forward (NDF) market has gained momentum, while the US dollar index is showing signs of strengthening.

The report showed that concerns about a widening trade deficit pushing the rupee down are not fully accurate.

Between April and October, India’s goods and services deficit stood at $78 billion, only slightly higher than $70 billion in the same period last year.

Experts believe that negative sentiment around trade numbers has been oversold in the markets.

Since April 2, when the US announced steep tariff hikes on multiple countries, the Indian rupee has depreciated around 5.5 per cent against the dollar -- more than most major global currencies.

The 50 per cent tariff imposed on India is much higher than the tariff levels imposed on China, Vietnam, Indonesia, and Japan.

This, the report said, is one of the biggest reasons behind the current pressure on the rupee, even though India has been trying to diversify its exports and push new free-trade agreements.

Nearly $45 billion worth of Indian exports -- mostly labour-intensive products -- are expected to be directly impacted by the US tariffs, the report added.

- IANS

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Reader Comments

P
Priya S
Okay, but as a common person, a weaker rupee means more expensive petrol, electronics, and imports. The report might say it's not weakness, but my household budget feels the pinch. We need faster solutions.
R
Rohit P
The 50% tariff from the US is the real shocker! Higher than China? That's unfair targeting. Our exporters, especially in MSMEs and labour-intensive sectors, are going to suffer badly. Government needs to negotiate harder.
S
Sarah B
Interesting analysis. The point about the trade deficit not being as bad as perceived is crucial. Market sentiment often overreacts. Long-term, diversifying exports and new trade deals are the way forward.
V
Vikram M
Respectfully, calling it "not a sign of weakness" feels like spin. When the rupee falls more than most major currencies, it indicates *relative* weakness in our position. We should acknowledge the challenge to fix it.
K
Karthik V
The focus on "Atmanirbhar Bharat" becomes even more important now. Global uncertainty won't go away soon. We must boost domestic manufacturing and reduce import dependency, especially for critical items.

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