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Rupee Under Pressure Amid Tariff Escalation
The Indian rupee has been struggling in August, weighed down by trade tensions. On August 14, 2025, the currency closed at ₹87.55/USD, after briefly touching ₹87.8850 in intraday trade. The Reserve Bank of India (RBI) has stepped in to control volatility, but traders expects the rupee to remain weak in the near term.
A depreciating rupee is more than just a number. It raises India’s import bill, fuels inflation, and makes loans more expensive over time. Every dip in the rupee makes foreign goods, crude oil, and imported components costlier. If inflation rises further, the RBI may be forced to raise the repo rate, which directly impacts home loan EMIs and other borrowings.
👉 For the latest exchange rates, check the RBI’s reference rate portal.
U.S. Tariffs Hit Indian Exports Hard
The tariff hike announced by President Trump–doubling duties on Indian goods to 50%, is expected to hit nearly $50 billion worth of exports. Key industries like textiles, gems and jewelry, auto components, and seafood are at risk.
This isn’t just about foreign sales. Lower exports reduce profits for businesses in India, weaken job creation, and limit tax revenues. If such tariff barriers persist, companies may cut back on investments, impacting SMEs that depend on export-linked demand.
For businesses facing shrinking margins, working capital loans and short-term credit could become crucial for managing cash flows.
Markets React: Investor Sentiment Weakens
The Sensex and Nifty have been volatile, with domestic auto and metal stocks rallying while export-driven sectors like IT and textiles took a hit. More importantly, Foreign Portfolio Investors (FPIs) have started pulling out funds, which adds to market instability.
When global investors exit, domestic markets face higher volatility. At the same time, safe-haven demand for Gold ETFs has risen, showing that investors are hedging against risk.
RBI Holds Rates Steady – for Now
Despite the turbulence, the RBI left the repo rate unchanged at 5.50%, giving short-term relief to borrowers as EMIs stay stable. However, the central bank has warned that inflation could change this stance in the months ahead.
For borrowers, this means new loans taken today might become costlier later. If you are considering a loan, it’s worth using an EMI calculator to compare fixed vs floating interest rate options.
Commodities: Gold Surges, Oil Softens
Global commodity markets are reacting in different directions. Gold and silver prices are at record highs, making gold jewelry and investments costlier but reinforcing its role as a hedge. On the other hand, crude oil prices have softened slightly, providing some relief to India’s import bill.
👉 For more insights, check our analysis on how wars affect gold prices.
Policy Response: Push for Self-Reliance
On Independence Day speech, Prime Minister Modi emphasized self-reliance. Plans include GST cuts from October and investment in EV batteries, fertilizers, and semiconductors to reduce dependence on imports.
This shift could support domestic industries and infrastructure projects, boosting demand for builder finance and long-term project funding.
What Borrowers Should Expect
What Investors Should Do
The tariff shock adds more uncertainty to an already volatile environment. Here’s what to consider:
Key Takeaways
Why It Matters
In the weeks ahead, the real test for India’s economy will be how effectively it balances external shocks like U.S. tariffs with domestic resilience. A weaker rupee, higher import costs, and pressure on exports will continue to challenge both households and businesses. For borrowers, this means keeping a close eye on RBI policy moves, reviewing loan structures, and using tools like EMI calculators to plan ahead. For investors, the lesson is diversification–gold, equities, and even global funds all have a role to play in spreading risk. While the uncertainty may feel unsettling, informed financial decisions can turn volatility into opportunity.
1 Comment
hemangi
Good Blog