The Indian rupee’s sharp fall to a record low against the dollar has sparked a flurry of remittances from expatriates in the Gulf, particularly from the UAE, where the dirham’s peg to the dollar has amplified the currency’s weakness.
Currency experts warn that the rupee, already battered by punitive 50 per cent US tariffs on Indian goods, faces more turbulence as the world’s fourth-largest economy contends with trade headwinds, portfolio outflows, and fiscal uncertainty.
On Friday, the rupee slipped past the crucial 88 mark, hitting 88.3075 per dollar in its steepest slide ever. The move followed Washington’s decision to double tariffs on Indian exports, a measure expected to widen India’s trade deficit and erode investor sentiment.
Analysts said the breach of the 88 level, long seen as a line in the sand, could prompt intervention by the Reserve Bank of India (RBI). Yet most expect the central bank to allow gradual depreciation in the interest of maintaining export competitiveness.
“Until the uncertainties around US tariffs settle down, it will continue being a rupee-negative event,” said Dipti Chitale, CEO at Mecklai Financial Services. “We believe the RBI will prioritise stability but won’t resist a weaker rupee if it aids exporters.”
India’s macro picture remains complex. The economy grew 7.8 per cent year-on-year in the April–June quarter, beating forecasts of 6.7 per cent and up from 7.4 per cent in the previous quarter. However, economists caution that second-quarter growth could slow as tariff impacts ripple through supply chains. “For now, our full-year GDP forecast for FY26 stands at 6.3 per cent, but the bias is clearly downward unless trade tensions ease,” said Sakshi Gupta, principal economist at HDFC Bank.
The rupee’s decline has been exacerbated by accelerating foreign outflows from equities, with investors wary of earnings risks in export-heavy sectors. “Everything now depends on how the RBI manages the markets,” said VRC Reddy, treasury head at Karur Vysya Bank. “The central bank has historically intervened to curb volatility, and any excessive speculative activity will not go unchecked.”
While the rupee’s weakness is rattling policymakers, it has brought an unexpected windfall for India’s vast diaspora. In the Gulf, home to more than nine million Indians, remittance activity has jumped sharply. Al Ansari Exchange reported a 15 per cent increase in transfers to India in recent days as expats took advantage of the favourable exchange rate.
“The rupee’s depreciation has created a valuable opportunity for the Indian community in the UAE to maximise the value of their remittances,” said Ali Al Najjar, chief operating officer at Al Ansari Exchange. “We have seen a strong surge in transactions, particularly with the Onam festival season adding to the momentum. Families are eager to send more back home when their money goes further.”
The rupee now trades near 24.03 per dirham, compared with stronger levels earlier in the year. For many expatriates, the difference translates into tangible benefits—allowing them to cover household expenses, pay down loans, or invest in property and education in India. The seasonal spike in transfers underscores the enduring link between currency markets and remittance flows from the Gulf, which collectively account for more than 30 per cent of India’s global inflows.
Al Ansari has ramped up operations to handle the surge, boosting liquidity at high-traffic branches, extending working hours, and offering promotional discounts on transfer fees. “Our priority is to ensure customers can take full advantage of the exchange rate environment through reliable and efficient service,” Al Najjar said.
Remittances have long served as a stabilising pillar for India’s external accounts, and a weak rupee typically magnifies inflows. According to the World Bank, India received a record $125 billion in remittances in 2024, with the GCC accounting for the bulk. Analysts say that if the rupee remains under pressure, remittances could hit another record in 2025, cushioning some of the tariff-induced pain.
Still, the broader currency outlook remains fraught. With oil prices climbing and India’s import bill swelling, the trade deficit is likely to widen further. The dollar’s global strength, supported by high US interest rates, adds to the rupee’s vulnerability. “Unless there is a meaningful improvement in US-India trade relations, the rupee could test fresh lows frequently,” Reddy of Karur Vysya Bank warned.
For millions of Indian workers across the Gulf, however, the rupee’s plunge is a timely windfall. As the currency struggles under the weight of tariffs and capital outflows, its weakness is reshaping financial flows from abroad—remittances that continue to provide lifelines to families, bolster consumption in India, and reinforce the Gulf’s role as a vital partner in India’s economic resilience.
- India
