Rupee Sinks to Record Low Beyond 88 as U.S. Tariffs Weigh on Economy

The Indian rupee fell to a fresh all-time low on Friday, sliding past the ₹88-per-dollar mark for the first time, as investors reacted to steep new U.S. tariffs on Indian exports. The currency briefly touched ₹88.29 before recovering slightly after the Reserve Bank of India (RBI) intervened in the market.

Washington earlier this week announced an additional 25% duty on Indian goods, effectively doubling tariffs to 50%. Market participants fear the move will erode India’s growth prospects, strain its external finances, and further widen its trade deficit.

At 2:10 p.m. IST, the rupee was quoted at ₹88.12 to the dollar, recovering from the day’s low but still weaker than its previous lifetime trough of ₹87.95, recorded in February. Traders said RBI’s dollar sales offered temporary relief, but the overall sentiment remained fragile.

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So far this year, the rupee has lost about 3%, making it the weakest performer among Asian currencies in 2025. On Friday, it also dropped to a record low against the Chinese yuan.

“Once the rupee hit ₹87.60, demand from importers who had not hedged their exposure surged. Many had been expecting the RBI to step in sooner. But once the ₹88 mark was breached, stop losses were triggered,” said Anindya Banerjee. He added that the ₹89 level is now the next threshold to watch.

Economic Growth Under Threat

Economists warn the new U.S. tariffs could shave between 60 and 80 basis points off India’s GDP growth if they remain in place for a year. This would put additional pressure on an economy already slowing.

The RBI currently projects GDP growth of 6.5% for the financial year ending March 2026. Exports to the U.S. account for about 2.2% of India’s GDP, but labour-intensive sectors such as textiles, gems, and jewellery are particularly vulnerable to the tariff shock. Analysts caution that large-scale job losses in these industries could amplify the damage.

Trade Balance Concerns

The rupee’s weakness comes at a time when foreign portfolio flows have been negative. Overseas investors have pulled out $9.7 billion from Indian equities and debt so far this year.

“The tariff-led drag on exports could add incremental stress to India’s trade balance, particularly when portfolio flows remain weak,” said Hari Shyamsunder, Vice President and Senior Institutional Portfolio Manager for emerging markets equity at Franklin Templeton.

Conclusion

The record fall in the rupee underscores the challenges India faces as global trade tensions intensify. While central bank intervention provided short-term support, sustained pressure from U.S. tariffs, weak portfolio flows, and rising import costs could weigh on the currency in the months ahead.