TL;DR: The Indian rupee fell to a record low amid U.S. 50% tariffs on goods and a rise in H-1B visa fees, pressuring the IT sector and remittance inflows. The Reserve Bank of India is managing volatility but allowing gradual depreciation, while IT stocks and external stability face headwinds.
- The Indian rupee fell to a record low of 88.7975 per dollar, closing at 88.7550, marking a 0.5% drop amid concerns over 50% U.S. tariffs on Indian goods and a sharp increase in H-1B visa fees.
- The rupee has depreciated over 3.5% this year, one of the worst performances in the region, pressured by tariffs on textiles, chemicals, and engineering exports and visa-related risks to the IT sector.
- Higher H-1B visa fees increase costs for Indian IT firms operating in the U.S., threatening profits and discouraging hiring; this impacts India’s $245 billion IT services industry.
- HSBC economists noted that about 5.4 million Indians in the U.S. send $33 billion in remittances annually; visa restrictions could reduce inflows by approximately $500 million.
- The Reserve Bank of India is intervening to limit volatility but appears to allow gradual rupee depreciation rather than defending a fixed level.
- IT stocks fell 0.7% on the day and have declined 18% this year, while broader indexes remained stable; subdued market volatility reflects investor expectations of gradual weakening.
- The rupee’s decline poses inflation risks through costlier imports and challenges India’s external stability due to reliance on U.S. exports and remittances amid ongoing geopolitical and trade tensions.