The Indian rupee’s fall past the ninety mark has revived an old question: Why does the currency of a large, fast-growing economy continue to weaken against the US dollar decade after decade? India’s GDP has expanded steadily, foreign exchange reserves have soared, exports have diversified, and global confidence in India’s long-term prospects has strengthened. Yet, the rupee has moved in only one direction—downward—from the fixed days of the post-colonial peg to the managed float of today.

Much of the public debate tends to focus on isolated triggers:

These factors do matter in the short run, as seen in the recent slump driven by heavy capital outflows, delays in India-US talks, record trade deficits and firm demand for dollars from importers.

But the deeper reasons behind a weakening rupee are broader, structural and stubborn. They predate single governments, outlast individual policy cycles and reflect the global monetary order as much as India’s domestic economic framework.

If more people want a currency, its value rises. Central banks, in turn, can intervene by selling or buying currency to influence market movements.

However, this is only the surface layer of a far more complex landscape. Beyond short-term trades, currencies are shaped by four major principles:

Over long periods, exchange rates adjust so that the same basket of goods costs roughly the same across countries. If one country consistently has higher inflation than another, its currency must weaken to maintain parity. India’s inflation has historically exceeded that of the US, giving the rupee a long downward slope.

Higher interest rates attract capital, but only in relative terms. The US Federal Reserve’s rate decisions ripple across the world because the dollar is the global reserve currency. When US rates rise faster than Indian rates, foreign investors shift money toward the dollar, pushing down the rupee. The Reserve Bank’s repo rate changes cannot offset this asymmetry.

A country that imports more than it exports needs more dollars than it earns. India’s current account deficit, driven heavily by crude oil and gold imports,........

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