Business · Markets · 1 hr ago
Rupee faces further pressure despite India’s smaller current account deficit
India’s rupee has fallen 5% this year and economists expect it to weaken further.
The current account deficit, which measures the gap between money flowing into and out of a country through trade and other transactions, has narrowed to about 0.5% of GDP from around 2.5% three years ago.
But tighter global financial conditions and foreign investment outflows are making it harder for India to attract enough dollars.
High crude oil prices add pressure because India imports large amounts of oil, raising its import bill and inflation risks.
The Reserve Bank of India has introduced a dollar supply window for three state-run oil companies and tightened rules on foreign-exchange derivatives.
Those measures may limit some pressure, but economists say the central bank cannot control global forces or oil prices.
They expect gradual further weakening, with the rupee especially sensitive to oil prices and investor sentiment.
The rupee is expected to weaken further despite India’s current account deficit falling to around 0.5% of GDP.
Economists cited tighter global financial conditions and persistent foreign portfolio outflows as pressures on the currency.
The rupee has depreciated 5% this calendar year and is the fourth-worst performing currency in Asia.
Brent crude prices near $105 a barrel add to pressure because India is a major oil importer.
The Reserve Bank of India has introduced measures to meet oil companies’ dollar needs and curb speculative demand.
- Who
- The Indian rupee and India’s economy are facing pressure. Economists cited in the article expect further weakening.
- What
- The rupee is expected to depreciate further despite a smaller current account deficit.
- When
- The article was published on October 21, 2026; the rupee has depreciated 5% this calendar year.
- Where
- India.
- Why
- Tighter global financial conditions, foreign portfolio outflows and high oil prices are adding pressure.
This story does not have two clearly opposing sides.
India’s current account deficit was about 2.5% of GDP.
The rupee depreciated 5%.
Radhika Rao said in a report that challenging portfolio flows could leave room for further gradual rupee depreciation.
The RBI introduced a special window for three state-run oil companies’ daily dollar requirements and tightened rules on foreign-exchange derivatives.
- Current account deficit
- Around 0.5% of GDP, down from about 2.5% three years ago
- Rupee depreciation
- 5% this calendar year
- Asian currency ranking
- Fourth-worst performing currency this year
- Brent crude
- Near $105 a barrel
- FY27 CAD estimate
- 1-1.5% of GDP expected by Dhiraj Nim
What people are saying
The size of the deficit that can be financed without persistent pressure on the exchange rate or FX reserves... needs to adjust as global capital becomes scarcer and costlier
Therefore, an expected FY27 CAD of 1-1.5% of GDP could prove difficult to finance
A challenging portfolio flows outlook leaves the door open to further gradual rupee depreciation, with high sensitivity to oil price movements and risk sentiments