India's Currency Crisis Is Now

India’s Leadership Should Hit The Road, Now.

By Govindraj Ethiraj

At 96 to the US dollar, the Indian rupee is perilously close to the century mark.

New Delhi is suddenly in a state of panic — several months too late, perhaps, but the alarm is warranted. The question now is how policymakers will navigate the fallout.

Now consider a counterfactual: If the rupee were still trading at 84 to the dollar, where it stood just a year ago in May 2025 before its current slide, the political angst would be muted.

Despite a Middle East war, an energy shock, and heavy economic tolls, a stable currency would have absorbed the blow, at least relatively.

The reality is that the rupee’s decline exposes a deeper, structural weakness in the Indian economy.

Dollars Draining Out Fast

Five years ago, during the pandemic, the currency traded at 73. The slide to 96 has been steady, thanks also to a lengthy phase of over-management by the Reserve Bank of India.

Despite official defenses, the currency has been battered by relentless capital flight. Foreign portfolio investors (FPIs) have yanked roughly $50 billion from Indian equities over the past 18 months.

Foreign direct investment is increasingly being repatriated as venture capital and private equity firms find exits. Domestic companies are deploying capital abroad, while Indian consumers are burning through foreign exchange on gold, offshore education, international travel and of course big ticket offshore investments.

What explains this massive FPI withdrawal?

Initially, markets blamed India’s lack of a compelling artificial intelligence play, the prevailing obsession from Wall Street to Seoul.

But a bleaker consensus has emerged: structural doubts about Indian corporate growth prospects and stretched equity valuations.

Add to this factors like capital gains taxes on foreign investors and a perennial lack of regulatory predictability, and the case for Indian equities weakens.

To the government’s credit, the pace of reform accelerated after the US launched a tariff war last May, around when the rupee’s latest slide began.

Remember, while Washington slapped tariffs globally, India received punitive treatment for its continued purchase of Russian crude in the form of additional tariffs.

A year of inward-looking policy followed including a much welcomed lowering of goods and service tax (GST) in September last year.

But long-term structural adjustments also require short-term breathing room.

Returning the rupee to the 84 level or thereabouts requires a concerted effort to woo back portfolio capital.

The broader imperative is to court all investors, including domestic industry, which is currently hoarding cash for the same overlapping reasons foreign investors are fleeing.

There are bright spots at the sub-national level.

The Roadshow India Needs

Andhra Pradesh is making waves with near weekly announcements of fresh investments, from data centers to motorcycle plants, totaling tens of billions of dollars.

State officials, channeling Chief Minister N Chandrababu Naidu’s successful 2000s-era transformation of Hyderabad, are aggressively pitching to the capital.

Yet, outside of the annual January soiree in Davos, most other Indian state leaders remain conspicuously passive unless we have missed the reporting on them.

At the federal level, the Prime Minister has been visiting several countries in the last week for instance and signing long term economic and business deals but they are exactly that, long term.

The Finance Ministry, meanwhile, has been remarkably quiet.

Private meetings with visiting institutional investors are insufficient when global capital is shifting.

Contrast this, at least to some extent, with US President Donald Trump, who recently visited China flanked by top executives from Nvidia, Apple, and Tesla.

India’s finance minister and business and finance titans must embark on aggressive roadshows across major global financial capitals.

They need to pitch the India story, face tough questions, and, crucially, listen to what global capital requires to return.

A roadshow isn't just public relations; it is a market signal of intent.

There is of course much to be done on stepping up direct investments and improving business climate. And quite likely it will but none of these will produce overnight results.

Nor will the promises of more capital flow in future change much foreign investor mood today.

India possesses a resilient economy, but as the plunging rupee proves, it is far from invincible.

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Rs 3.12 lakh crore

That’s the combined market capitalisation nine of India’s 10 most-valued companies lost last week as benchmark indices logged sharp losses amid rising geopolitical tensions in West Asia, a weakening rupee, and fears of imported inflation driven by surging crude oil prices.

Top laggards:

• Reliance Industries: Lost Rs 1.34 lakh crore

• State Bank of India: Lost Rs 52,245 crore

• Tata Consultancy Services: Lost Rs 47,415 crore

• Bajaj Finance: Lost Rs 27,892 crore

• HDFC Bank: Lost Rs 20,630 crore

Top gainer:

• Bharti Airtel: Added Rs 42,470 crore

Impact: Analysts say crude oil prices above $105 a barrel have intensified concerns around inflation, fiscal stress, and pressure on corporate margins. They expect markets to remain volatile this week as investors track oil prices, rupee movement, geopolitical developments in West Asia, and foreign investor flows.

Fuel Bills Burn Deeper

Indraprastha Gas Limited hiked CNG prices by Re 1/kg on Sunday, citing higher input gas costs and a "steep appreciation" of the dollar, the second increase in two days. CNG now costs Rs 80.09 per kg in Delhi and Rs 88.70 per kg in Noida and Ghaziabad.

Overview: The CNG hike follows Friday's Rs 3 per litre rise in petrol and diesel, the first in four years, pushing Delhi petrol to Rs 97.77 and diesel to Rs 90.67 per litre, their highest since May 2022.

Context: The trigger is Iran's blockade of the Strait of Hormuz, through which 55% of India's crude imports ordinarily flow. Global crude has surged over 50% since the West Asia conflict began, while the rupee has breached the 96-per-dollar mark, compounding import costs across all fuel categories.

Gems Export Slowdown

India’s gems and jewellery exports fell 9.07% year on year in April 2026 to $2.23 billion, as high gold prices and geopolitical uncertainty weighed on jewellery demand. The sharpest decline came from polished diamonds, with exports dropping nearly 19%, reflecting weaker demand in key markets such as the United States and China.

Catch Up Quick: The downturn also comes amid growing concerns over India’s rising import bill after oil prices surged during the Iran conflict. Earlier this month, Prime Minister Narendra Modi urged Indians to avoid buying gold for a year to help conserve foreign exchange reserves, triggering fears of tighter import restrictions and higher duties on gold.

Pivot: The government has since tightened rules for duty-free gold imports used by exporters, adding further pressure on the sector.

Heatwave Alert!

The India Meteorological Department (IMD) has issued a heatwave alert across large parts of north and central India, warning that temperatures could touch 44°C in Delhi over the next few days. Punjab, Haryana, Rajasthan, Uttar Pradesh and Madhya Pradesh are also likely to experience severe heatwave conditions.

Origin: Meteorologists have linked the spike in temperatures to clear skies, dry northwesterly winds and the absence of strong western disturbances, which usually bring temporary relief during May. The IMD has also warned of unusually warm nights in some regions, increasing the risk of heat-related illnesses.

Several cities have already recorded temperatures 3-5°C above normal. Authorities have advised people to avoid direct sun exposure during afternoon hours, stay hydrated and limit outdoor activity.

Extreme heat can also hurt labour productivity across India’s outdoor economy. The International Labour Organization estimates that heat stress could wipe out 5.8% of India’s working hours by 2030, equivalent to nearly 34 million full-time jobs. Workers in construction, agriculture and manufacturing often reduce working hours, take more breaks or stop work altogether during severe heatwave conditions to avoid dehydration, exhaustion and heatstroke.

Context: The heatwave comes ahead of the expected onset of the southwest monsoon later this month, raising concerns over increasingly extreme and unpredictable weather patterns across India.