Industry Odisha Bureau, Sep 28: Economists see the rupee slipping to ₹96-97 per dollar by end-FY27. RBI intervention is cushioning the fall. Weak capital flows, a firmer dollar, elevated crude and rising yields keep pressure alive.
The Indian rupee is under renewed strain against the dollar. Economists and forex specialists expect further weakness through the current financial year. They see the currency slipping to ₹96-97 per dollar by the end of FY27.
That outlook sits uneasily with the Reserve Bank of India’s hopes for stability. The central bank has argued the rupee could steady, or even strengthen. Markets, so far, are telling a more complicated story.
A surplus that flatters
On paper, India’s balance of payments looks healthy. The headline BoP surplus, however, rests heavily on one source.
Gaura Sengupta, chief economist at IDFC First Bank, points to FCNR(B) inflows. These Foreign Currency Non-Resident (Bank) inflows have been absorbed by the RBI. Strip them out, and the picture changes sharply.
The BoP excluding FCNR(B) was negative in the first half of FY27. Sengupta links that shortfall to weaker capital flows, notably foreign portfolio investment (FPI). In other words, the surplus does not necessarily signal broad-based foreign appetite.
Intervention as shock absorber
The rupee hit a record low of ₹96.96 per dollar in late May. The RBI and the government then announced measures to attract foreign capital. The currency recovered to around ₹94.50, but the relief proved brief. Those gains lasted only about a week in mid-June.
Over the past month, the rupee has traded largely between ₹95.65 and ₹95.95. Dealers say heavy RBI forex intervention has stopped it weakening past 96.
Foreign exchange reserves dropped $14.8 billion to $765.9 billion in the week ended September 18. In the week of September 4, reserves had hit a record $785.7 billion. The decline coincided with intervention, though reserve movements can reflect several factors.
Stability case meets market reality
RBI Deputy Governor Poonam Gupta has made the opposing case. She argued last week the rupee could stabilise or even appreciate. In her view, depreciation over the past eighteen months may prove temporary. Gupta said the currency may have overcorrected by as much as 13% since March 2025.
Many economists remain more cautious about the rupee outlook.
Dollar and crude tighten the squeeze
The dollar index rose to 101.2 last week from 98.8 a month earlier. A firmer dollar typically weighs on emerging market currencies, including the rupee. Elevated crude oil prices add another layer of pressure. Surging global bond yields have also unsettled emerging markets more broadly.
Madan Sabnavis, chief economist at Bank of Baroda, expects continued rupee depreciation. He sees the currency weakening by 3-4% next year. Sabnavis also expects limited intervention as the dollar strengthens globally. In his view, that would keep imported inflation ticking.
An uncertain road to March
The RBI still commands a substantial reserve buffer. That gives it room to smooth sharp swings in USD/INR. Reserves alone, however, cannot replace durable capital inflows.
Much will depend on foreign portfolio investment, the dollar and crude prices. For now, the gap between official optimism and market caution remains wide. Whether the rupee steadies or slips further in FY27 remains an open question.
