WhatsApp university blames foreign investors for the rupee’s slide – like blaming fever on a thermometer

On December 16, the rupee crossed the 91-per-dollar mark to touch an all-time low of 91.09. As soon as this happened a joke started going around on WhatsApp: USD (+1) = INR (+91). Finally ISD Codes and Exchange rate matched.

Indeed, like all popular WhatsApp jokes, this one is also very lame, appealing to the lowest common denominator of our minds, and yet it makes us laugh. But the reasons behind the fall in the value of the rupee against the dollar aren’t exactly lame. 

Why is the rupee falling?

The dollar-rupee exchange rate is a price – the amount of rupees we pay to buy a dollar or the amount of rupees we get paid when we sell a dollar. At a basic level, it’s as simple as that.

And what determines this price? As is the case with almost everything bought and sold in a market, the price is determined by the demand for and the supply of dollars and rupees, at any given point of time.

Now, things start getting slightly complicated here, given that several factors determine this demand and supply. And these factors ultimately tell us a thing or two about the economy as a whole.

WhatsApp economics

The rupee has depreciated by more than 6 percent against the dollar since the end of 2024. If you are a regular reader of the business press, a follower of those in the business of managing other people’s money (OPM), or someone who learns economics by taking courses at the University of WhatsApp, you would have come to know by now that this is primarily happening because of the foreign institutional investors (FIIs) selling out of Indian stocks.

From January to now, they have net sold Indian stocks worth Rs 1.62 lakh crore. In fact, as of September 30, 2025, their ownership in stocks listed on the National Stock Exchange was at a 15-year low.

When foreign investors sell Indian stocks they get paid in rupees. If they have to repatriate this money out of India, they need dollars. So, they sell rupees and buy dollars, leading to the demand for dollars going up, and the value of the rupee depreciating against the dollar.

In simple English, anyone who wants dollars needs to pay more for it in Indian rupees. This is precisely how things work in your local sabzi market as well. The foreign exchange market is no different on this front.

So, why have foreign investors been selling? First, the net sales of the larger listed companies, of the kind that foreign investors like to invest in, have been growing at a very slow pace for two and half years now.

Second, foreign investors are now chasing artificial intelligence stocks all across the world. They can barely play that theme in India. They can in the US, China, Taiwan, South Korea etc. 

Third, as the rupee depreciates the return the foreign investors earn in dollar terms – which is what is important for them – comes down. Indeed, in dollar terms, the one-year return on the Nifty 50 Index – one of India’s premier stock market indices made up of 50 large companies listed on the National Stock Exchange – has been zero.

This also motivates foreign investors to sell out of Indian stocks. This leads to further demand for dollars, and an even further depreciation of the rupee. And so the cycle feeds on itself.

Now, the explanations offered on WhatsApp are simplistic versions of what I have just explained above. Nonetheless, there is more to it than just this. There are other factors at work as well which you won’t come to know about at the University of WhatsApp.

Or which the business press and the OPM wallahs find too complicated to get into, because it hampers the clear and crisp stories they excel at selling.

The nuance

Of the Rs 1.62 lakh crore worth Indian stocks sold by the foreign investors since January 2025, a large chunk worth Rs 1.13 lakh crore, were sold in January and February. The trouble is that close to half of the depreciation of the rupee against the dollar in 2025 has happened since the middle of October 2025. How does one explain that?

Further, other than Indian stocks, the foreign investors also invest in Indian debt securities – or financial securities issued by the government and corporate firms to borrow money.

From January to now, the foreign investors have poured in $7.4 billion or Rs 65,568 crore into these securities. So, the foreign investors may have net sold Indian stocks this year, but they have bought debt securities.

This makes the clear cut picture being offered by the business press, the OPM wallahs, and the University of WhatsApp, slightly more convoluted and complex. Clearly, there is more to it than foreign investors selling out of Indian stocks.

What else?

Other than dollars coming into India to buy stocks and debt securities, they also come in through foreign direct investment (FDI), which is the money that firms or investors from other countries bring into India to build businesses, factories, offices, or buy large stakes in Indian companies. This is another major source of dollars for the country.

In response to a recent question in the Lok Sabha, the ministry of commerce and industry said that gross FDI inflows into India during April–September 2025 – the first half of the current financial year – stood at $50.4 billion, the highest ever for the first half of a financial year. Now, that sounds like good news on the University of WhatsApp.

The trouble is that the gross FDI number only captures the money foreigners bring into India. But they can take money out of India as well, and such repatriation creates demand for dollars. Once this is adjusted for, the headline figure shrinks by more than half, to about $24 billion.

Further, Indian firms can also invest abroad, creating demand for dollars as well. Once we adjust for this, what we get is the net FDI figure, which stands at $7.6 billion.

Indeed the net FDI figure has been falling from 2020-21 onwards when it had stood at around $44 billion. In 2024-25, it was less than a billion dollars. So, the supply of dollars through this route has taken a beating, even though this financial year is going to be significantly better than the last one.

American tariffs?

India earns dollars through goods exports and pays dollars for goods imports. On the whole, the country imports more goods than it exports.

This difference is referred to as the trade deficit. From April to November this year it stood at around $224 billion, up 10 percent from last year. The higher deficit suggests an increase in demand for dollars.

A lazy line of reasoning – one that yours truly has also been guilty of recently – would be to argue that this has largely happened because US trade sanctions on India have slowed export growth, pushing up the goods trade deficit.

But that’s not true, at least not yet. India’s goods exports to the US from April to November this year stood at $59 billion, 11 percent higher than the same period last year. In fact, these exports rose by close to 23 percent in November after falling in September and October.

So, what has led to a higher trade deficit? First, the exports of petroleum products – which is a major dollar earner for the country – has fallen by close to 15 percent to around $38 billion from April to November this year.

Second, the imports of gold and silver – something that India spends a lot of dollars on – has risen by more than 12 percent to around $53 billion this year.

These two factors are the major reasons for the higher trade deficit, and thus a higher demand for dollars.

While, India runs a trade deficit when it comes to goods, it runs a trade surplus when it comes to services. From April to November this year, the services trade surplus stood at around $134 billion up more than 15 percent from the same period last year.

This helps plug in some of the gap due to the goods trade deficit of $224 billion. But there is still a gap. A lot of this gap is filled up through the inward remittances – dollars being sent to India by those working outside India.

Then there is the case of Indians spending more dollars for foreign travel. That has added to the demand for dollars as well. Of course, the University of WhatsApp did not get anywhere around all this. It’s just too complicated.

The Reserve Bank of India

So, this leaves us with the Reserve Bank of India (RBI), and the impact that it has on the dollar-rupee exchange rate.

In a recent reply to a question raised in the Lok Sabha, the ministry of finance said that “the value of the Indian rupee is market-determined, with no target or specific level or band.”

This isn’t totally true. As the ministry went on to say in the very next line of the reply, the RBI “regularly monitors the foreign exchange market and intervenes in situations of excess volatility”.

How does the RBI do this? It sells dollars that it has accumulated over the years and buys rupees. When RBI sells dollars their supply goes up. This slows the depreciation of the rupee.

From January to September 2025, the RBI has net-sold more than $20 billion to slow down the fall of the rupee. This is considerably more than the $12.4 billion it sold through the 12 months of 2024.

We only have data up to September 2025, so that makes it difficult to say anything with full confidence on this front. But given what the RBI Governor Sanjay Malhotra has been saying lately, it seems that the RBI is not interfering as much in the foreign exchange market to slow down the fall of the rupee, as it was earlier in the year.

A major reason for it is obviously the fact that the RBI doesn’t have an unlimited supply of dollars. It cannot create them out of thin air. Having said that, it appears the RBI intervened aggressively on December 17, selling dollars, and pushing the exchange rate to close at ₹90.4 per dollar.

Also, the foreign currency assets of the RBI – largely, the dollars that it has on its balance sheet – have more or less been stagnant since December 2023. Clearly, not enough dollars are coming into the country.

What’s the point?

As I said at the very beginning, what all this basically tells us is that the demand for the dollar has gone up and the supply hasn’t kept pace. This explains the trend of the depreciating rupee through this year. But it does not explain why the rupee depreciated so quickly from 90 to 91.

The answer for that perhaps lies in the fact that in December, the foreign investors sold Indian stocks and debt securities worth Rs 26,846 crore or $3 billion.

Now, wasn’t the University of WhatsApp saying just that? Well, yes. But stopping the explanation there is like blaming a fever solely on the thermometer. Foreign investors selling out of Indian stocks and debt securities may explain the timing of the fall from 90 to 91; they don’t totally explain the trend of a weakening rupee through the year.

To conclude, the rupee’s fall isn’t a puzzle or a plot. It’s plain arithmetic. India is demanding more dollars than it is earning – through trade, capital flows, travel, repatriation, and outward investment. The RBI can smooth the edges, not alter the math. Ignoring that reality won’t strengthen the rupee.

And until that arithmetic changes – through stronger goods exports, steadier capital inflows by FIIs and a stronger net FDI figure – the rupee’s direction is unlikely to change either. Of course, until then we can all rely on the University of WhatsApp. 

Vivek Kaul is an economic commentator and a writer.