Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Q6. Discuss the macroeconomic factors behind the recent depreciation of the Indian rupee. What policy measures can be adopted to mitigate its adverse impacts? (10 M)
Difficulty Level: Medium
Reference: IE
Why the question
The rupee’s slide to ₹88.75/$ in Sept 2025 amidst FPI outflows and US policy shocks highlights the intersection of global pressures and domestic vulnerabilities, making it a critical macroeconomic concern.Key Demand of the question
The question requires identifying macroeconomic drivers of rupee depreciation and recommending suitable policy interventions to mitigate its economic fallout.Structure of the Answer:
Introduction
Contextualise rupee depreciation as a reflection of external headwinds and internal imbalances.Body
- External factors driving depreciation such as global monetary tightening, trade tensions, and dollar strength.
- Domestic factors including inflation differential, CAD pressures, and capital market volatility.
- Policy measures across monetary, fiscal, trade, and structural dimensions to stabilise the rupee.
Conclusion
Suggest future-oriented solutions emphasising resilience and credibility of India’s macroeconomic framework.
