New Delhi, May 24 -- Over the last one year, the value of the rupee against the dollar has seen a sharp decline. From 85.48 in May 2025 to presently around 96.82, India's currency has depreciated by more than 13%; this is the sharpest drop since the 2013 'taper tantrum.' Two sharp downturns have occurred, one after the hike in US tariffs and the second after the outbreak of the US-Israel war on Iran. These are purely exogenous shocks.

For the foreign exchange market, the shock came from large outflows of foreign portfolio investor (FPI) money. Since January 2026, India's net FPI outflows have been to the tune of $22.2 billion (until 19 May). The previous fiscal year also witnessed a rise in our trade deficit as a proportion of GDP-from 2...