Mumbai: The Indian rupee continued its slide on Tuesday and slipped below the 90 per dollar mark for the first time. Traders said the fall was driven by heavy capital outflows and rising pressure from foreign tariffs on Indian goods.
The currency touched around 90.14 during intraday trading which analysts described as a psychological barrier. The decline marks almost eight months of steady weakening from around 85 to its current level.
Economists say the main trigger has been foreign investors pulling out money from Indian markets. Reports suggest more than 17 billion dollars has been withdrawn from equities so far this year. Foreign direct investment has also slowed and exporters are holding back dollar earnings expecting the rupee to fall further.
Another factor weighing on the currency is the sharp rise in import demand. Companies buying fuel machinery and raw materials are accumulating dollars while exporters are not selling enough to balance the market.
The slide comes at a time when the United States has imposed tariffs on several Indian products with some duties reportedly as high as 50 percent. The trade environment is seen as uncertain and investors appear cautious.
Despite this pressure India’s domestic economy remains strong with good growth indicators. But experts warn that strength in output alone may not be enough to stabilise the rupee if global conditions and trade tensions continue.
Some analysts predict the currency could slip further in the coming months and may even touch 91 per dollar next year if foreign investment fails to recover.
A weaker rupee would make imported goods more expensive which could raise living costs and increase inflation. Fuel electronics medicines and products dependent on imported materials may become costlier if the decline continues.
The Reserve Bank of India has not made any major intervention yet but markets will be watching closely for steps to support the currency.
Economists say the outlook will depend on global economic sentiment trade developments with the United States and whether foreign investors regain confidence in Indian markets.