India has been battling the depreciation of the rupee against the US dollar for years, significantly impacting international trade, particularly imports. As of today, 1 US dollar equals between Rs 94.30 and Rs 94.55. The falling value of the Indian rupee increases the cost of imports such as crude oil, machinery, medical equipment, and electronic goods, all of which are essential to citizens’ daily lives.
For example, if crude oil costs $100, India has to spend Rs 9,000 when the exchange rate is Rs 90 per US dollar. This is only for crude oil, while India imports many other essential goods. Such a disparity often raises the question of why global currencies are measured against the US dollar. To understand this, it is important to examine the Bretton Woods System.
Gold Standard and the Aftermath of World War I on Exchange Rates
Before World War I, trade agreements were backed by the gold standard, national currencies, and barter arrangements. During the late 19th century, each country’s currency was exchangeable for a fixed amount of gold. As a result, exchange rates remained relatively stable because currencies were convertible into gold.
However, the gold standard was disrupted during World War I, and many countries struggled to return to fixed exchange rates afterward. Moreover, the Great Depression, the devaluation of national currencies, and the introduction of exchange controls made international trade increasingly difficult.
During the 1930s, several countries adopted barter arrangements for bilateral trade. For example, crude oil could be exchanged for machinery without using hard currency. Even before World War II, the US dollar, along with the pound sterling, the French franc, and the German Reichsmark, was widely used in regional trade.
World War II and the Bretton Woods System
The economic instability experienced during the interwar years highlighted the need for a more stable international monetary system. As the United States emerged as the dominant economic power during World War II, representatives from 44 countries met at the Bretton Woods Conference in 1944 to establish the Bretton Woods System.
Under this system, currencies were pegged to the US dollar, while the US dollar itself was made convertible into gold. The conference also led to the establishment of the International Monetary Fund (IMF) and the World Bank to support global trade and monetary stability.
Rupee Depreciation Against the US Dollar Over the Years
India’s exchange rate history shows a long-term depreciation of the rupee against the US dollar since 1947. According to Equity Manager Jaya Gupta in a LinkedIn post, the Indian rupee depreciated from Rs 3.30 per US dollar in 1947 to Rs 94.45 per US dollar in June 2026. This represents a loss of approximately 96.5% of its value over 78 years of independence.
Over the past 5 to 20 years, the INR has depreciated by approximately 3.4% to 4.3% annually against the US dollar. In 2008, the rupee witnessed a significant depreciation of around 22% against the US dollar. However, between 2014 and 2022, the rupee depreciated by around 24% to 25%, a relatively slower pace compared with several earlier periods.
The graph below shows the value of the rupee against major currencies between April and July 2022. (Source: PIB, Ministry of Finance)
Note: Data is the monthly average exchange rate with respect to INR (April –July 2022)
Recent INR Depreciation and RBI Interventions
The recent rise in the USD-INR exchange rate has been attributed to geopolitical tensions, including the ongoing US-Iran conflict, causing the Indian rupee to weaken beyond Rs 90 per US dollar. Although the Reserve Bank of India (RBI) has projected average headline inflation of around 4.6% for the 2026-27 financial year, rising fuel prices and the increasing cost of other essential goods continue to burden consumers.
Following the recent depreciation of the rupee, the RBI has taken several measures to stabilise the currency.
To meet international financial obligations, the RBI has used its foreign exchange (forex) reserves as a stabilisation tool. When the rupee weakens sharply, the central bank sells US dollars from its approximately $700 billion forex reserves, increasing the supply of dollars in the market. This helps absorb excess demand for foreign currency, reduces speculative pressure, and supports the value of the rupee.
A major regulatory measure came into effect on April 10, when the RBI capped banks’ Net Open Positions (NOP) at $100 million per day. NOP represents the net foreign currency exposure that a bank holds after accounting for its purchases and sales of foreign currencies. The measure aims to limit excessive speculation and one-sided bets against the rupee. (Business Standard)
Additionally, the RBI’s intervention in both the spot and forward foreign exchange markets has helped curb volatility arising from foreign portfolio investment (FPI) flows driven by global uncertainties.
The value of a currency is closely linked to global economic conditions and a country’s financial obligations. The depreciation of the Indian rupee against the US dollar has remained a persistent challenge since independence. However, the RBI’s recent measures have yielded encouraging results. After touching around Rs 95.2 per US dollar in late March 2026, the rupee has shown signs of stabilisation. The NOP limits have also improved the onshore availability of US dollars and contributed to a more disciplined and stable foreign exchange market.