India’s fourth-quarter GDP is expected to slow because export growth is weakening. This is linked to the delayed impact of tariffs. Domestic demand is still holding up.
The Rupee is under pressure as capital flows out during a PE/VC exit cycle. It is also hurt by weak FII inflows, even after a recent trade deal, and by worries that AI could reduce demand for India’s IT services.
USD/INR is expected to rise toward 93.00 over the medium term. In the near term, the Rupee may get some support in March due to seasonal patterns and expected inflows.
Recent data confirms the slowdown in India’s economy. Q4 2025 GDP growth eased to 6.5%, mainly because exports weakened. Domestic consumption remains a bright spot, but weaker exports are dragging overall growth. This fits with the lagged effect of tariffs that built up through 2025.
This backdrop is weighing on the Rupee. It is struggling as private equity-related outflows continue. FIIs have also been net sellers. January 2026 data shows a net equity outflow of almost $2 billion. At the same time, concerns are rising about the IT services sector, as AI adoption by North American clients starts to reduce billable hours.
With these headwinds, USD/INR looks set to move higher toward 93.00 over the next few months, from around 90.50 now. Traders may want to position for this with tools such as USD/INR call options or bull call spreads. The view is driven by ongoing weakness in capital flows.
In the next few weeks, though, it makes sense to stay flexible. USD/INR could dip in March. Seasonal factors, such as year-end fiscal inflows, often support the Rupee at that time, as seen in March 2025. Any March strength in the Rupee would likely be temporary, not a reversal. It may offer a better level to start or add to long USD/INR positions.
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