To stem rupee’s slide, India should first fix its fragile domestic economy

Amidst the crisis in West Asia, Prime Minister Narendra Modi has urged restraint on gold purchases. But asking Indians to abstain now is like asking them to swim against the tide.

Modi, it is clear, is attempting to conserve precious foreign currency as the rupee has weakened from Rs 85- Rs 86 per US dollar in mid‑2025 to around Rs 95 by mid‑2026 – roughly a 10% year‑on‑year depreciation.

In the 2025-’26 financial year, India imported $71.98 billion worth of gold, about 721 tonnes – second only to China. Every slide in the value of the rupee makes gold imports more expensive.

But the economy’s fragility cannot be solved merely by piling up foreign exchange reserves. Abstaining from gold or working from home will not fix the fundamentals.

The weakness of the rupee is, at heart, symptomatic of the fragility of the domestic economy – a problem that predates the West Asia crisis. The rupee’s slide reflects a deeper structural challenge: foreign investors repatriating their profits and investors pulling money out of India.

A main reason foreign investors hesitate to commit to India – and why even Indian firms are reluctant to undertake long‑term capital investment – is the persistent weakness of the domestic economy.

This weakness stems from wage stagnation and slowing consumption...

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