SBI Study on Rupee: Due to the 50 percent import duty imposed on India by America, there has been tremendous pressure on the Indian Rupee for the last few months and this has emerged as a major reason for the current decline. According to a recent report by the Economic Research Department of State Bank of India (SBI), since April 2, 2025, when the US announced a large-scale increase in tariffs, the rupee has weakened by about 5.7 percent against the dollar, which is considered to be the biggest decline among major economies.
Rupee will regain strength
However, the report also clarifies that while the rupee’s decline may have been significant, it is not overly volatile, indicating that the fundamentals of the Indian economy are still strong. The rupee has seen intermittent strengthening due to expectations built from time to time regarding the US-India trade agreement, but geopolitical uncertainties and increasing trends of global protectionism have limited the inflow of foreign investment.
The report also states that portfolio investment inflows have reduced significantly compared to earlier years, which has increased pressure on the rupee. While there was an average net portfolio inflow of $162.8 billion between 2007 and 2014, it has declined to an average of $87.7 billion from 2015 to 2025. According to SBI, before 2014, foreign investment inflows were a major cause of rupee fluctuations, but now delays in trade agreements, geopolitical tensions and global uncertainties have made investors’ stance cautious.
Expectation from SBI report
Despite this, the report expresses confidence that the Indian economy has shown remarkable strength despite prolonged uncertainty, protectionism and labor supply shocks. SBI assesses that even though the rupee is going through a weak phase at present, it may see a strong comeback in the second half of the next financial year. The level of foreign exchange reserves is still adequate and with the intervention being taken from time to time by the Reserve Bank, it is expected that the position of the rupee may strengthen again in the coming times.
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