Rupee beset by a trifecta of troubles. Will the slide to new lows proceed?

Cash despatched residence by Indians working within the US and the nation’s export revenue will come below stress due to Trump’s countless arm-twisting of the world’s fourth-largest financial system, be it by means of sudden and hefty charges on H-1B visas or a 50% tariff, together with a 25% extra levy for getting Russian oil, specialists stated. That may damage the present account steadiness–the distinction between a rustic’s exports and imports of products and providers, together with switch of funds.

“A majority of the web providers export revenue comes from IT providers that India offers,” based on Madan Sabnavis, chief economist, Financial institution of Baroda. “There are additionally remittances that these employed overseas do to ship cash to India, and if IT firms are deterred from sending Indians overseas to work on these visas, the remittances can drop.”

High supply of remittances

The US is the highest supply of remittances for India, accounting for about 27.7% of such inflows within the yr by means of March, based on information by the Reserve Financial institution of India (RBI). It was adopted by the United Arab Emirates (19.2%) and the UK (10.8%). Remittances rose to $33.2 billion within the June quarter from $28.6 billion a yr earlier.

Trump has made a number of flip-flops, however India has been on the receiving finish. Whereas the 2 nations negotiate a bilateral commerce deal, these strikes are nonetheless anticipated to harm the native financial system. Estimates by India’s chief financial advisor V Anantha Nageswaran peg the affect at 50 foundation factors of India’s GDP development in FY26, however retained the forecast at 6.3-6.8%.

Nevertheless, economists at CareEdge Scores estimate that if 50% US tariffs persist, India’s FY26 gross home product (GDP) development may very well be round 6%, in contrast with its base case of 6.5%, which assumes tariffs settle at 15-20%.

The Indian rupee has depreciated from 85.5 towards the greenback since Trump introduced tariffs on a bunch of countries in April to 88.7 on 26 September.

Providers exports to take successful

India’s internet providers receipts elevated to $47.9 billion within the June quarter towards $39.7 billion a yr earlier, confirmed RBI information. Software program providers, the largest element of providers exports, contributed $41.5 billion, up from $37.4 billion within the first quarter of the earlier fiscal.

If outsourcing comes below risk, then these internet providers exports may decline, based on Sabnavis. “Whereas there isn’t a instant drawback on the present account aspect, there may very well be stress that can manifest in a yr from now, which can exert stress on the rupee.”

India’s present account deficit (CAD) was 0.2% of the GDP in FY26’s first quarter to June, towards a surplus of 1.3% within the earlier three months. The CAD was 0.6% in FY25.

The affect of Trump’s actions is tough to quantify as of now, however the affect of the H1-B visa has queered the pitch on the CAD entrance, based on a fixed-income and buying and selling head of a personal financial institution.

“The capital account was already below stress from relentless FPI (international portfolio investor) promoting due to our overvalued fairness markets, and the concern is that is more likely to proceed till markets do not appropriate, the banker stated, including that the rupee may slip to 89-89.25 within the interim, with RBI intervening at that stage.

Overseas fund selloff

Overseas buyers have internet bought $16.9 billion within the Indian fairness market up to now in 2025 in contrast with a internet buy of $124 million in 2024, confirmed information from NSDL. They had been internet patrons of $4.7 billion value of debt devices. When mutual fund investments are included, abroad buyers have internet bought $10.7 billion value of investments up to now this yr, in contrast with a internet shopping for of $20 billion in 2024.

“These considerations are weighing on FPI flows,” CareEdge Scores stated in its 24 September word.

August noticed the best internet FPI outflows in 4 months at $2.3 billion (fairness and debt mixed), whereas September (as of 23 September) recorded marginal internet inflows of $0.4 billion, the score agency stated. Nevertheless, it warned that the current announcement of a pointy improve in H-1B visa charges might weigh on sentiment.

DK Joshi, chief economist at Crisil, stated the bottom case for the CAD was 1% of GDP in FY26, greater than 0.6% within the earlier fiscal. “Whereas others tended to be extra optimistic, we had been conservative on the CAD, which we see widening due to the geopolitical components at play, which we took under consideration to reach on the 1% determine .”

Sujan Hajra, chief economist at Anand Rathi group, was extra sanguine. He expects the CAD to stay throughout the 1% of GDP bracket in FY26.

“A few of the mitigating components embrace low oil worth and the import of oil accounting for lower than 30% of our total import, which stood at 40% when oil crossed the three-figure mark in 2007-08,” Hajra stated. “One other issue is that the H-1B subject will result in an optimum mixture of onshoring-offshoring and FTAs (free-trade agreements) with 12 nations (together with the UK, the UAE, Australia, Switzerland, and so on) means exports by means of third nations may considerably ameliorate the 70% hit to total merchandise exports of $80-81 billion to the US.”

A weaker foreign money may lead to “import substitution”, easing stress on the rupee, he stated. Employee remittances of greater than $130 billion in FY25 into the nation, together with foreign exchange reserves of over $700 billion, preclude the chance of a run on the native unit.