The Indian rupee depreciated at a faster pace compared to its Asian counterparts like the Chinese yuan, Vietnamese dongor or Indonesian rupiah, through the turbulent 2025.

Experts believe that internal dynamics coupled with global headwinds saw the fall of the Rupee by over 17 per cent compared to the US dollar this year.

Rajeev Juneja, President of PHDCCI told UNI in an interview, "Rupee depreciation in 2025 largely reflects fast-evolving global financial markets, including volatile capital flows and geopolitical fears."

Empirical evidenc, Juneja said, showed that India's rupee has been structurally overvalued in real terms since 2016, despite prolonged nominal depreciation.

"While sharp currency movements pose short-term challenges for import-dependent sectors, they also help maintain external competitiveness and cushion the economy against global demand shocks" he added.

The currency breached the psychological Rs 90 margin earlier this month, after begining the year at about Rs 86.20-86.25 in the current year.

If we dig out historical charts, the Indian rupee which started its volatile journey from Rs 3.30 to the US dollar in 1947 to Rs 90 in 2025. The currency has witnessed massive depreciation trends ever since it was first devalued in the 1960s. After liberalisationwhen it was placed on free float, its depreciation has been faster yet smoother.

The Nominal Effective Exchange Rate (NEER) of the rupee had shown a decline of 8 percent till October this year. Since the the fall was faster given global headwinds. NEER measures the weighted average value against a basket of foreign currencies, indicating international competitiveness without adjusting for inflation.

The INR has remained volatile since the post-liberalization era of 1991, as it has lost about 4.5 per year on average.

If we look at the depreciation trends, between 1990 and 2000, the average yearly depreciation against the USD remained 9 per cent. Between 2000 and 2010 it remained at nil, or 0 percent.

Looking ahead, between 2010 and 2020, it remained stagnant at 5 percent, and in the current 2020-2025 period, it was at the rate of 4 percent.

Sharing sectoral perspective with UNI, Adhil Shetty, CEO of BankBazaar, said, "The rupee's depreciation in 2025 reflects tighter global monetary conditions, geopolitical uncertainty, and sustained demand for foreign capital. For consumers, this will be felt through higher prices for imported goods, costlier foreign travel, and marginally higher borrowing costs if inflation persists."

"While a weaker rupee adds to inflationary pressures, it also supports export-oriented sectors by improving India's competitiveness in global markets. Going forward, currency stability will hinge on capital inflows, domestic growth momentum, and the RBI's calibrated policy interventions," Shetty added.

Although numerous factors contribute to the value of the rupee in the international market, including higher imports (oil, gold), capital outflows by foreign investors seeking better returns in the US, a strong US dollar led by higher interest rates, persistent trade/current account deficits, domestic inflation, and global trade uncertainties.

Any government can't take control of all these factors, but in India the Reserve Bank of India (RBI) manages currency policy by controlling money supply, setting interest rates, and ensuring monetary stability with the help of the Monetary Policy Committee (MPC) and Currency Management Department.

It works under the RBI Act of 1934 to achieve goals like price stability and growth.

The RBI Act of 1934 is a central legislation that established the Reserve Bank of India (RBI) and defines its core functions, structures and powers providing the statutory framework for India's monetary policy.

No doubt, external factors also contributed to the rupee's depreciation in 2025, like the imposition of steep tariffs by the United States, uncertainty over the settling of the India-US trade pact, inflation dynamics, and so on.

In fact, in 2025 the Real Effective Exchange Rate (REER), which adjusts the NEER for maintaining the inflation differences, also fell about 9.9 percent.

REER is an economic indicator that shows a country's currency value against a basket of major foreign currencies. It helps in assessing if the currency is overvalued or undervalued.

An increasing REER means exports are becoming costlier, and a decreasing REER reflects real purchasing power and trade strength.

Earlier this month, at MPC policy announcements countering the rupee depreciation question, RBI Governor Sanjay Malhotra reiterated that markets determine the prices; they're efficient in doing so.

Ironically, a weakening rupee in international currency galore does not always point towards a negative sign; it also reflects the stronger stand of the country in the global trade arena.

When the rupee becomes weaker in the global market, our exports become cheaper for other countries, so Indian companies that have their processes in the global market can earn more in dollars.

Simply put, a weaker rupee can boost India's export earnings. It increases sectoral competitiveness of information technology, textiles, and pharma. Although it also raises import costs of raw materials.

Currency depreciation happens due to a myriad of factors; sometimes governments also do it intentionally to come out of an economic crisis. Although sudden currency depreciation in emerging markets is often feared as 'contagion.'

In economics, contagion is the rapid spread of financial or economic distress, shocks, or crises from one market to another, or one country to another. It causes increased volatility and negative correlations in asset prices.

Among the most notable such event was the Asian crisis of 1997, which happened due to the fall of the Thai baht, leading to a major currency fall in Southeast Asian currencies.

Well now for 2026 there are multiple challenges in front of our monetary policymakers regarding stabilizing INR value and finalizing the India-US trade pact, which can end the so-called tariff war that started in August this year.