Analysts cite Middle East tensions, higher oil prices, and El Nino risks as key threats to INR stability in coming quarters.
The Indian rupee remains vulnerable to external shocks, including elevated energy costs and geopolitical tensions in the Middle East. Analysts highlight India’s dependence on imported oil, softer export growth, and US trade risks as key pressures on the currency’s outlook.
India’s GDP growth is projected to slow to 6.5% in FY2026-2027 from 7.7% in FY2025-2026, weighed down by higher oil prices, supply chain disruptions, and lingering trade uncertainties. While domestic demand remains resilient, weaker monsoon projections and global commodity price volatility pose additional risks.
El Nino conditions may reduce monsoon rainfall to 90% of the historical average, further straining agricultural output and inflation. Despite these challenges, substantial FX reserves are expected to provide support for the rupee in the near term.