Following a period of strengthening, the Indian currency, the rupee, has faced a serious warning that raises concerns for the Indian economy. Analysts from Axis Bank Research suggest that the rupee could significantly depreciate against the US dollar.
According to the forecasts, by December next year, the rupee could fall to the level of 102 against the US dollar. If these predictions materialize, it will have a substantial impact on the economy. Experts are also examining how this currency depreciation will occur.
The report presented by Axis Bank Research contains a forecast suggesting that by December 2027, the rupee could decline to ₹102 against the US dollar. However, the decline will not stop there; by the last month of 2028, the rupee could weaken to 106 against the dollar.
In its report published on Tuesday in The Middle (Kingdom) Path, Axis Bank Research confirmed its initial assessments, forecasting the USD/INR exchange rate in the range of 97–99 by March 2027 and 98–100 by June 2027.
The report explains the reasons for the expected weakening of the rupee. It indicates that the recent recovery of the Indian currency may only provide temporary relief, as structural pressure from the external sector, capital outflow, and the need to replenish foreign exchange reserves continue to put pressure on the rupee. Specialists expressed serious concern about the pressure on India's external financial positions.
It is noted that despite attempts by the central bank to stabilize rupee fluctuations, constant intervention by the RBI has led to a reduction in effective foreign exchange reserves. Consequently, replenishing these reserves remains a priority, which limits the potential for a strong rupee appreciation even with an improvement in foreign capital inflow. The report also highlights outflows of approximately $2–3 billion monthly under the Liberalised Remittance Scheme and about $3 billion from foreign direct investment.
Despite the long-term pessimistic outlook, the Indian rupee showed signs of recovery last week. Against the dollar, it strengthened by 37 points due to improved portfolio investments from the US, lower yields on US treasury bonds, and support from a stable dollar. Data from NSDL shows that the net inflow of portfolio investments last week was about $2 billion. Furthermore, the 10-year yield on US treasury bonds decreased to approximately 4.9%, reducing pressure on emerging market currencies. There was also a softening in crude oil prices, with Brent Crude reaching $105 per barrel.
Currency depreciation in any country negatively affects its economy. In the case of the Indian rupee, a decrease in its value makes all dollar-related expenses, such as importing crude oil and goods, more expensive. Rising oil prices increase the risk of inflation in the country. Additionally, studying abroad, international travel, and imported goods require more rupees.
For example, education expenses of $50,000 at an exchange rate of ₹95 per dollar would cost ₹47.5 million. However, if the rupee reaches the forecasted 102 to the dollar by December 2027, this amount will rise to ₹51 million, representing additional costs of ₹3.5 million. Since India imports most of its crude oil and pays for it in dollars, the rupee's weakening will lead to a significant increase in import costs, which could cause a rise in gasoline and diesel prices in the country. The increased cost of diesel, in particular, will raise the cost of transporting necessary goods and intensify inflationary pressure in the country.



