The Indian rupee softens, which recently slide to near-record lows may cushion the impact of steep US tariffs, offering a glimmer of hope for India’s economy. The currency, trading at 87.54 against the dollar, has weakened by 2% this year, but economists argue this could make Indian exports more competitive despite a 25% US tariff imposed on August 1, 2025.
The Impacts as Indian Rupee Softens Amid Tariffs
A weaker Indian rupee lowers the cost of Indian goods abroad, potentially offsetting tariff-driven price hikes. “The currency’s depreciation acts like a natural buffer,” said Rajani Sinha, chief economist at CareEdge Ratings, noting that sectors like textiles and gems could still find buyers. India’s $86.5 billion exports to the US, including pharmaceuticals and jewelry, face disruption, but the rupee’s fall may limit losses to 0.3-0.4% of GDP.
Role of RBI
However, the relief comes with pain. Families face rising import costs, especially for oil, fueling inflation fears. The Reserve Bank of India (RBI) is expected to intervene to curb volatility, with a key policy decision looming on August 6. Small businesses, already stretched, worry about shrinking profits as trade tensions linger.
What’s Next
As India navigates this economic storm, the Indian rupee’s weakness could be a double-edged sword—easing export pressures but squeezing households. Economists urge reforms to boost competitiveness, hoping to turn this challenge into an opportunity for growth.
Published in SouthAsianDesk, August 5th, 2025
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