Increasing crude oil prices amid the ongoing conflict in the Middle East have added further pressure on the rupee even though the macroeconomic fundamentals of the Indian Economy remain strong, minister of state for finance Pankaj Chaudhary told parliament on Tuesday.
The exchange rate of the Rupee (INR) against the US Dollar (USD) has witnessed a depreciation of 7.49% till March 17, 2026 during 2025-26.
“This depreciation of the INR has been influenced by the increase in trade deficit, amid relatively weak support from the capital account. Additionally, increasing crude oil prices amid the ongoing conflict in the Middle East have added further pressure on the INR,” Chaudhary informed Rajya Sabha.
Crude oil prices
Crude oil prices have crossed USD 100/barrel after conflict broke out between US-Israel and Iran on February 28, casting a shadow on global growth.
Economic growth continues to be supported by robust domestic demand, moderating inflation, improved corporate
balance sheets, and sustained fiscal discipline, he said. Real GDP has consistently grown at over 7% during the last three years. Headline consumer price inflation has eased significantly, averaging 1.9% during 2025-26 (April-February).
He said the exchange rate is determined by a combination of global and domestic factors such as the movement of the Dollar Index, trend in capital flows, level of interest rates, movement in crude prices, current account deficit, etc.
“These factors may evolve differently from domestic growth conditions,” he said. Therefore, the coexistence of strong economic growth with exchange rate depreciation does not represent a paradox but rather reflects the distinct drivers influencing the economy and the external sector, he added.