Indian Rupee Hits Record Low Amidst U.S. Tariff Measures

In late August 2025, the Indian rupee depreciated to a historic low against the U.S. dollar, reaching 88.3075 on August 29. This decline coincided with the U.S. government's implementation of a 50% tariff on over half of India's $85 billion worth of exports, including key sectors like textiles, gems, jewelry, and shrimp. The tariffs, effective August 27, were imposed in response to India's continued purchases of Russian oil and existing trade barriers in agriculture and dairy sectors.

The depreciation of the rupee and the imposition of tariffs have significant implications for India's economy, including a potential widening of the trade deficit and dampened GDP growth. Analysts estimate that the tariffs could reduce GDP growth by up to 1 percentage point. Additionally, foreign investors have withdrawn over $13 billion from Indian equities this year, further pressuring the currency. The Reserve Bank of India (RBI) has intervened in the currency market to stabilize the rupee but less aggressively than in previous instances. Economists suggest that the RBI might allow a gradual depreciation to help exporters remain competitive.

The U.S. tariffs have strained diplomatic relations between the two countries, with India denouncing the measures and emphasizing its strategic autonomy. The Indian government has criticized the tariffs as "unfair, unjustified and unreasonable," asserting that its energy policy and supply chains are independent and grounded in its strategic autonomy.

The tariffs are expected to severely impact labor-intensive sectors such as textiles, gems, jewelry, and shrimp, potentially leading to job losses, especially among small and medium-sized enterprises. A sector representative mentioned, "Job cuts will happen for sure in the jewellery and diamond sectors as the US is our largest market."

The recent depreciation of the Indian rupee and the imposition of U.S. tariffs have significant implications for India's economy, trade relations, and societal well-being. A comprehensive analysis of these developments is essential to understand the multifaceted impact and to explore potential strategies for mitigation and adaptation.