India's Rupee Falls Over Five Percent Since Middle East Conflict Began

India is working to support a declining rupee as higher oil prices tied to the Middle East conflict add pressure to its economy. The currency has fallen more than five percent since the conflict began in February and is Asia's worst-performing major currency in 2026 so far.

It reached a record low above 96 to the dollar on Friday. Officials have identified stopping further declines as a key priority.

The central bank has spent billions of dollars to stabilize the currency and limited speculative trading. It also provided a special credit line to oil importers to reduce dollar demand. Prime Minister Narendra Modi called for voluntary cuts in gold purchases and foreign travel to limit dollar outflows.

A widening current account deficit is adding to the strain.

The gap is projected to exceed two percent of GDP this fiscal year, more than double last year's level. Foreign investors have sold more than $20 billion in Indian stocks since the conflict started. Dollar inflows have slowed, raising the possibility of a balance-of-payments gap between $67 billion and $88 billion.

Foreign exchange reserves have fallen to about $697 billion from over $720 billion before the conflict. The decline leaves reserves covering roughly 11 months of imports.

Higher import costs are affecting manufacturers and food processors that rely on dollar-priced raw materials. Smaller firms often lack tools to manage currency swings. In Kerala's cashew industry, which imports raw nuts from Africa, costs have risen sharply.

Buyers can now afford about 90 percent of last year's volumes. Students planning to study abroad face higher expenses. Education consultants report that attending school in the United States now costs more than one million rupees extra compared with a year ago.

Economists note that further steps could include fuel price increases or measures to attract dollar deposits from non-resident Indians. Officials have said intervention can reduce volatility but cannot fix underlying pressures.