Rupee Depreciation and Currency Trends

Summary of Key Facts and Data on Indian Rupee Exchange Rates and Economic Indicators

Exchange Rate Movements

1. Current Status (November 2025):

   • The Indian Rupee closed at 89.46 INR/USD, marking a depreciation to less than 90 for the first time.
   • The rupee depreciated not only against the dollar but also against other major currencies:
     • Euro: from 102.32 to 103.63.
     • British Pound: from 116.08 to 118.27.
     • Japanese Yen: from 0.5642 to 0.5720.

2. Annual Comparisons (from November 2024):

   • Against the dollar: 84.49 to 89.46 (approximately 6.8% depreciation).
   • Against the euro: 89.12 to 103.63 (about 16.4%).
   • Against the British pound: 106.97 to 118.27 (about 10.6%).
   • Against the yen: 0.5574 to 0.5720 (approximately 2.6%).

Nominal and Real Effective Exchange Rate (NEER & REER)

1. Nominal Effective Exchange Rate (NEER):

   • NEER has been below 100 since 2018-19, indicating an appreciation of the rupee relative to the 2015-16 base year.
   • As of October 2025, NEER dropped to 84.58, reflecting significant depreciation in the previous nine months.

2. Real Effective Exchange Rate (REER):

   • REER considerations involve inflation differentials, making it a more accurate measure of currency competitiveness.
   • REER peaked at 108.06 in November 2024; however, it fell to 97.47 in October 2025, suggesting under-valuation of the rupee.

Inflation and Economic Indicators

1. Consumer Price Index (CPI) Inflation:
   • CPI in October 2025 was 0.25%, lower than various other economies (for instance, the US and Japan at 3% each, UK at 3.6%, Euro Area at 2.1%, Indonesia at 2.9%, and Brazil at 4.7%).

Monetary Policy and International Monetary Fund (IMF) Classification

1. IMF Classification:

   • As of November 2025, IMF reclassified India's exchange rate regime to a “crawl-like arrangement”, signifying that it is not fully floating nor stabilized but allows for gradual adjustments.
   • This shift from “stabilized” reflects the Reserve Bank of India's (RBI) interventions aimed at managing rupee depreciation.

2. RBI Policy:

   • Under Governor Sanjay Malhotra, who took office on December 11, 2024, RBI has adopted a flexible exchange rate policy that permits occasional interventions.
   • The primary motivations for the RBI's policy adjustments include easing domestic inflation and the need for enhanced trade competitiveness.

Implications and Outlook

• Sustained nominal depreciation and low inflation could further decrease the rupee's REER in the upcoming months.
• The need for a strong rupee is mitigated by easing inflation pressures, while the competitive stance in global markets is increasingly vital due to changes in international trade dynamics.

Conclusion

The recent trends in the Indian rupee's exchange rates underscore a period of significant fluctuation influenced by global currencies, domestic inflation rates, and the evolving policy landscape under RBI, with critical implications for India’s economic competitiveness.