Indian Rupee Hits Record Low of ₹90.5 per USD; RBI Cuts Repo Rate to 5.25% and Injects ₹1.4 Trillion Liquidity
The Indian Rupee touched a historic intraday low of ₹90.5 per US dollar on December 5, 2025 — its weakest level ever — before recovering after Reserve Bank of India (RBI) intervention through state-run banks aggressively selling dollars. The RBI also cut the repo rate by 25 basis points (bps) to 5.25% and announced liquidity infusion of nearly ₹1.5 lakh crore into the banking system via bond purchases and forex swaps. The rupee's depreciation has been driven by: delays in the India-US FTA negotiations, persistent FII capital outflows, a strong US dollar globally (driven by Federal Reserve policy and Trump's return as US President), rising trade deficit, and geopolitical uncertainty. The depreciation has significant macroeconomic implications: it raises import costs (crude oil, electronics, capital goods), fuels inflationary pressure, and increases external debt servicing costs — but also benefits export-oriented sectors such as IT services, pharmaceuticals, and textiles. For Rajasthan, a weaker rupee boosts the competitiveness of its major export sectors: gems and jewellery (Jaipur), marble (Makrana, Kishangarh), handicrafts and textiles, and international tourism.
Key Points for RAS
- Indian Rupee touched a historic low of ₹90.5 per USD on December 5, 2025.
- RBI cut the repo rate by 25 bps to 5.25% and infused ₹1.4 lakh crore liquidity.
- Depreciation drivers include delayed India-US FTA, FII outflows, and strong US dollar.
- A weaker rupee raises import costs for crude oil, electronics, and capital goods.
- Export-oriented sectors like IT, pharma, and textiles benefit from rupee depreciation.
- Rajasthan's gems, marble, handicrafts, and international tourism gain export competitiveness.
The Indian Rupee touched a historic intraday low of ₹90.5 per US dollar on December 5, 2025 — its weakest level ever — before recovering after Reserve Bank of India (RBI) intervention through state-run banks aggressively selling dollars. The RBI also cut the repo rate by 25 basis points (bps) to 5.25% and announced liquidity infusion of nearly ₹1.5 lakh crore into the banking system via bond purchases and forex swaps. The rupee's depreciation has been driven by: delays in the India-US FTA negotiations, persistent FII capital outflows, a strong US dollar globally (driven by Federal Reserve policy and Trump's return as US President), rising trade deficit, and geopolitical uncertainty. The depreciation has significant macroeconomic implications: it raises import costs (crude oil, electronics, capital goods), fuels inflationary pressure, and increases external debt servicing costs — but also benefits export-oriented sectors such as IT services, pharmaceuticals, and textiles. For Rajasthan, a weaker rupee boosts the competitiveness of its major export sectors: gems and jewellery (Jaipur), marble (Makrana, Kishangarh), handicrafts and textiles, and international tourism.
Frequently Asked Questions
1 What historic low did the Indian Rupee reach on December 5, 2025, and what intervention did the RBI make?
The Indian Rupee touched a historic intraday low of ₹90.5 per US dollar on December 5, 2025 — its weakest level ever. The RBI intervened by directing state-run banks to aggressively sell dollars in the forex market to stabilise the currency. Additionally, the RBI cut the repo rate by 25 basis points to 5.25% and injected ₹1.4 lakh crore liquidity into the banking system through bond purchases and forex swaps.
2 What are the main factors that caused the Indian Rupee to depreciate sharply in late 2025?
The sharp depreciation of the Indian Rupee in late 2025 was driven by multiple factors: delays in India-US Free Trade Agreement (FTA) negotiations creating trade uncertainty; significant Foreign Institutional Investor (FII) capital outflows as global investors moved to safer assets; a strengthening US dollar following policy changes after Trump's return to power; and a widening India trade deficit due to rising import costs.
3 What is the repo rate, and what impact does an RBI repo rate cut have on the economy?
The repo rate is the rate at which the RBI lends short-term funds to commercial banks. When the RBI cuts the repo rate, banks can borrow more cheaply from the central bank and are expected to pass on lower interest rates to consumers and businesses. This stimulates borrowing, investment, and consumption — boosting economic activity. The RBI's cut to 5.25% in late 2025 was aimed at supporting growth amid global headwinds.
4 Which Indian export sectors benefit from rupee depreciation and how does it affect Rajasthan specifically?
A weaker rupee makes Indian exports cheaper and more competitive globally. Sectors like IT services, pharmaceuticals, textiles, and handicrafts benefit as their dollar earnings translate into higher rupee revenues. For Rajasthan specifically, the depreciation boosts export competitiveness of gems and jewellery (Jaipur), marble and stone products (Makrana and Kishangarh), handloom textiles, and makes international tourism to Rajasthan more attractive as foreign visitors get more value for their money.
5 What are the negative consequences of rupee depreciation for the Indian economy?
Rupee depreciation raises the cost of imports significantly. Since India imports about 80-85% of its crude oil requirements, a weaker rupee directly increases energy costs, leading to higher fuel prices and broader inflation. Costs also rise for imported electronics, capital goods, and industrial machinery. This increases the current account deficit, puts pressure on foreign exchange reserves, and raises the cost of servicing India's external debt denominated in foreign currencies.
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