For a Stronger Rupee, India Must Fast-Track Trade Deals

The Indian rupee has lost nearly 3% of its value against the U.S. dollar since the beginning of 2025. What makes this slide notable is that while the rupee has weakened, several peer currencies—including the euro, the British pound, and the Japanese yen—have managed to gain ground against the dollar in the same period. This divergence highlights the structural vulnerabilities in India’s external sector and points to the urgency of reform, particularly in the realm of trade policy.

Why the Rupee Is Under Pressure

A depreciating rupee directly increases the cost of imports, from energy to critical industrial inputs, feeding into domestic inflation. While global oil prices and capital flows play a role, India’s persistent trade deficit is a fundamental driver. Imports of energy, electronics, and gold continue to outpace export growth, creating pressure on the current account and, in turn, the currency.

Competitors Are Securing Gains

Peer economies that have strengthened their currencies are not simply beneficiaries of global monetary shifts; they have strategically positioned themselves through robust trade frameworks. For example, the European Union’s extensive trade agreements provide diversified export markets and shield member currencies from volatility. Similarly, East Asian economies with integrated trade networks are better able to balance external shocks.

Trade Agreements as a Currency Buffer

For India, accelerating bilateral and multilateral trade agreements is more than a question of market access; it is a macroeconomic necessity. Comprehensive Economic Partnership Agreements (CEPAs) and Free Trade Agreements (FTAs) can:

Boost exports by opening new markets and lowering tariffs on Indian goods.

Lower import costs through predictable supply chains and reduced barriers.

Attract investment by signaling policy stability and integration into global value chains.

A stronger trade architecture could therefore provide a buffer for the rupee, reducing its vulnerability to sudden external shocks.

The Cost of Delay

Negotiations with major partners—whether the EU, the UK, or the Gulf economies—have often dragged on for years. Each delay not only diminishes India’s bargaining position but also risks leaving exporters locked out of preferential access that competitors are already enjoying. The opportunity cost is reflected not just in missed trade volumes but in weakened currency resilience.

A Call for Pragmatic Strategy

India’s policymakers must recognize that trade policy is now deeply tied to currency stability. A clear roadmap that prioritizes timely conclusion of agreements, supports export-oriented sectors with competitiveness reforms, and streamlines domestic regulations is crucial. Without this, the rupee risks further depreciation, increasing economic vulnerabilities and eroding the purchasing power of households.

In essence, strengthening the rupee will require India to move beyond rhetoric and accelerate action. Trade deals are not just diplomatic wins—they are instruments of economic resilience.#Rupee

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