The 50 percent import tariff imposed by the US on India has put immense pressure on the Indian Rupee in the last few months, and has emerged as a major reason for the current fall. According to a recent report by the Economic Research Department of State Bank of India (SBI), the rupee has weakened by about 5.7 per cent against the dollar since April 2, 2025, when the US announced massive tariff hikes, which is believed to be the sharpest decline among major economies.
Rupee will strengthen again
However, the report also made it clear that the rupee has depreciated significantly, but it has not been very volatile, which shows that the fundamentals of the Indian economy remain strong. The rupee has seen intermittent appreciation on expectations of a US-India trade deal, but geopolitical uncertainties and rising global protectionism have limited foreign investment inflows.
The report also states that portfolio investment inflows have declined significantly compared to previous years, which has further increased the pressure on the rupee. While average net portfolio flows between 2007 and 2014 were $162.8 billion, this has declined to an average of $87.7 billion between 2015 and 2025. According to SBI, before 2014, foreign investment inflows were a main reason for rupee fluctuations, but now delays in trade agreements, geopolitical tensions and global uncertainties have made investors cautious.
SBI report gives hope
Despite this, the report expresses confidence that the Indian economy has shown strong resilience amid prolonged uncertainty, protectionism and labor supply shocks. SBI estimates that although the rupee is currently going through a weak phase, a strong recovery can be expected in the second half of the next financial year. The level of foreign exchange reserves is still adequate, and periodic interventions by the Reserve Bank are expected to strengthen the rupee again in the times to come.