Why Is the Rupee Falling When Growth Is Strong — Is the Capital Account to Blame?

The recent move in USD/INR raises a question — not about India’s growth, which is no longer debatable — but about who will finance that growth.

At its core, this is a capital account problem in India’s Balance of Payments.

Think of India’s balance sheet. On the asset side, the story is compelling: real assets compounding, platforms scaling, and what is rapidly becoming the largest consumer market in the world.

The stress shows up on the liability side.

How does India structure its balance sheet to attract cheaper, longer-duration, higher-quality capital at scale?

In finance, this is a signalling problem. High-quality capital begets quantity. Credible exits compress risk premia.

India still sends the opposite signal. Capital withdrawal remains unnecessarily difficult. Consider NRIs investing in Indian real estate: TDS norms are materially higher than global standards. Yes, exemptions exist. But complexity itself is a tax. Friction is the signal — and global capital reads it clearly.

The same question applies to long-term capital gains. How do India’s LTCG rates compare with global financial centres competing for the same balance sheets?

If global capital is expected to underwrite India’s growth, it must be allowed to realise returns without penalty. Reward the balance sheets that fund growth.

Capital account reform is the real opportunity hiding behind the USD/INR move — not to defend the currency, but to turn it into a structural advantage for India’s next decade.

Disclaimer: In the article "Why Is the Rupee Falling When Growth Is Strong — Is the Capital Account to Blame?" above - Any views, comments or communication (above or in the past) should not be construed to be investment advice by Alternative Growth (hereafter referred to as “AltG”) in any form whatsoever. AltG does not make an offer to sell or solicit to buy any securities.