The rupee may remain under structural depreciation pressure despite the Reserve Bank of India’s efforts to rebuild its foreign-exchange war chest, with domestic brokerage firm Systematix estimating a new average annual depreciation path of around 6.5 per cent for the currency.
In its latest India economy report, Systematix said the RBI’s foreign-currency mobilisation could provide temporary stability, but argued that the underlying forces driving rupee weakness have not been resolved. Without aggressive RBI intervention, the Indian currency could already have crossed the ₹100-per-dollar mark, according to the research house.
Systematix noted that the rupee has depreciated about 17 per cent over the past two years, from around ₹83 to nearly ₹97 per dollar, despite substantial RBI intervention. During FY25 and FY26, the central bank’s foreign-currency purchase and sale transactions amounted to nearly 98 per cent of its FCA stock. Systematix contrasted this with the 2013 taper-tantrum episode, when a smaller mobilisation programme was followed by a roughly 10 per cent appreciation in the rupee.
Systematix said the contrast suggests that foreign-currency mobilisation alone cannot deliver lasting exchange-rate stability. Since 2013, the rupee has depreciated by around 100 per cent, significantly underperforming broad dollar and emerging-market currency indices. The report attributes the weakness to a combination of productivity, capital-flow, trade competitiveness, inflation and policy factors.
India’s external trade position has also become a concern. The trade deficit widened to around $86.6-86.8 billion in the first quarter of FY27, while the deficit with China reached a record level and was annualising at roughly $120 billion. Meanwhile, services exports contracted in the first quarter, with exports estimated at around $49 billion, down 18 per cent sequentially.
The brokerage also pointed to a sharp decline in the rupee’s real effective exchange rate, which has fallen about 17 per cent since late 2024. Despite this apparent depreciation, exports have not strengthened sufficiently, partly because Indian manufacturing remains dependent on imported inputs.
Systematix expects the rupee’s depreciation path to remain elevated and volatile. The additional $80 billion in foreign-currency assets may raise import cover to around 10 months and provide near-term intervention capacity, but the report cautioned that the buffer could be rapidly drawn down if global interest rates rise or capital outflows intensify.
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