Indian rupee has been on a tumultuous ride since the beginning of the calendar 2021, witnessing significant volatility in the band of 72.4-76.0/USD. From maintaining an appreciating bias in the early months of 2021 amidst record high foreign inflows, the INR has been losing ground past couple of months and is likely to end the year as one of the laggards among the Asian market currencies.
Domestically, with retail mobility exceeding pre pandemic levels and gradually rising vaccination cover (as of Dec 27th, India inoculated ~60% of its total population with at least one dose of Covid vaccine), pent-up demand is getting unlocked. This in addition to high global commodity prices, is keeping demand for imports at elevated levels, thereby weighing upon the merchandise trade deficit. India's cumulative trade deficit in Apr-Nov'21 already stands higher at USD 116.9 bn as compared to the USD 113.4 bn in the corresponding pre pandemic period of 2019.
Read a detailed analysis on Rupee by Acuité Ratings & Research here: Link to the report