The rupee is falling into India’s development paradox
The country’s energy vulnerability is not separate from its development story — it is increasingly a consequence of it
An edited version of this piece was first published in Firstpost.
Today, I woke up to a message from a friend: “What the hell is happening?” Attached was a screenshot of the rupee-dollar exchange rate, flashing at another all-time low. By Tuesday morning, the rupee had slipped past 95.68 against the dollar for the first time in history, as the West Asian conflict sent crude prices back above $100 a barrel. For anyone paying foreign university fees, planning travel, or simply watching imported prices climb, the panic felt immediate and personal.
The anger came quickly too. Social media filled with questions about economic management and anxieties about inflation and national decline. Speaking in Hyderabad two weeks ago, Prime Minister Modi urged Indians to reduce petrol and diesel use, take the metro, carpool, curb foreign travel, and work from home where possible — language that deliberately echoed the moral appeals of the Covid years: collective discipline and sacrifice for a national good.
Within hours, the images circulating were of his own convoy in Hyderabad — a sprawling line of vehicles that became an immediate punchline. “All these vehicles running on cow urine?” went one widely-shared retort from journalist and author Mrinal Pande. Opposition leader Rahul Gandhi framed the appeal not as leadership but as evidence of its absence; stating the government was trying to shift the blame for “12 years of failures” onto the shoulders of the Indian public. Whatever one makes of the opposition’s motives, the image problem was real. Asking a population to carpool and take the metro, while moving through cities in a dozen-SUV cortege, is a hard sell.
But focusing only on the politics risks missing the larger story underneath the rupee’s fall.
India imports nearly 85% of its crude oil requirements, which means an oil shock rapidly becomes a currency shock. When crude prices surge, India needs vastly more dollars to pay for energy imports, and the rupee takes the pressure. The country spent $174.9 billion on crude and petroleum products in the financial year ended March 2026, some 22% of its total import bill. That number doesn’t shrink when geopolitics turns difficult.
The deeper paradox is this: the rupee’s vulnerability during a global energy crisis is also, in part, a consequence of India’s own development.
A richer, more industrialised, more mobile India consumes far more energy than it did two decades ago. More freight moves across highways. More factories operate across industrial clusters. More homes run air-conditioners during increasingly brutal summers. More people fly, more people drive, and more infrastructure gets built. These aren’t signs of waste — they’re what development looks like on the ground.
For decades, India’s low per capita energy consumption was treated as evidence of underdevelopment. Even today, the average Indian consumes roughly one-eighth the energy of the average American and about a third of the average Briton. But when hundreds of millions begin consuming more energy — which is precisely what development requires — import vulnerability rises too. India still suffers from enormous inefficiencies and deeply energy-intensive elite lifestyles, but a significant portion of its growing energy demand is structural: expanding freight networks, new factories, construction booms, electrified rail, data infrastructure, and a manufacturing push designed to position India as an alternative supply-chain hub to China.
The transition away from fossil fuels is underway. In June 2025, India reached 50% of installed power capacity from non-fossil sources, five years ahead of its Paris target. Railway electrification covered 99.6% of the broad-gauge network by March 2026. Around 1.4 million electric two-wheelers were sold in FY2026, making them the largest part of the EV market (although issues with the grid still persist for wider adoption). This is where India’s energy transition may look different from the West: less about expensive electric cars in suburban driveways, more about scooters, trains, dense cities and public transport. The direction is clear.
But installed capacity is not delivered energy. Non-fossil sources still accounted for only 29.2% of actual power generation in 2025–26. And electricity transition is not the same as oil transition. Freight trucks run on diesel, aviation depends overwhelmingly on jet fuel, and industrial logistics remain tied to hydrocarbons. A country of continental scale cannot decarbonise overnight while simultaneously industrialising, urbanising, and expanding living standards for hundreds of millions of people.
This is where simplistic climate debates tend to disconnect from the realities of developing countries. The question is not whether India should transition away from fossil fuels. It of course must. The question is how a country still climbing toward middle-income prosperity manages that transition without freezing the development it took generations to begin.
Europe industrialised first and decarbonised later. America built its prosperity on more than a century of cheap fossil fuel consumption. India is attempting something without clear precedent: industrialising at the exact moment the world is trying to move beyond fossil fuels altogether.
For years, Indians demanded the material markers of development that wealthier countries already enjoyed: mobility, infrastructure, manufacturing growth, reliable electricity, air-conditioning, logistics networks, and modern consumption. We are now living through the uncomfortable reality that these things require enormous amounts of energy — and that much of that energy, for now, still has to be bought in dollars.
The falling rupee is not simply a story of policy failure or market panic. It is also the sound of a developing country colliding with the limits of the geopolitical world it inherited.