It's not AI.

"By almost every conventional measure of sovereign economic health - growth, inflation, fiscal trajectory, external vulnerability and investor confidence in the real economy - India's fundamentals are among the strongest of any emerging market. Yet the rupee has depreciated by over 13% against the dollar in the past two years and by more than 15% since January 2023." This is unfair, wrote Chief Economic Advisor (CEA) V Anantha Nageswaran. In 2025, India received three credit rating upgrades. In May, Morningstar DBRS upgraded India to BBB from BBB (low), in August, S&P upgraded to BBB from BBB-, and in September, Rating and Investment Information Inc (R&I) upgraded India's sovereign credit rating to BBB+ from BBB. pib.gov.in. The reason for the rupee's woes is "the extraordinary pull that the artificial intelligence (AI) supercycle has exerted on global capital flows" "compressing currencies from Seoul and Jakarta to Mumbai regardless of whether  these economies were well or poorly managed.". According to a report from the Bank of Baroda, the Reserve Bank of India (RBI) "reduced the repo rate from 6.50% to 5.25%, a cut of 125 basis points (bps), starting in February 2025." However, "the weighted average lending rate (WALR) on fresh loans declined by 93 bps, showing partial transmission of the rate cuts." ET. In addition to slashing interest rates, the RBI "also pumped nearly Rs 20 trillion into banks, nearly double the amount of liquidity support during the pandemic. Yet the funds simply leaked out of India's banking system as global money managers dumped local assets and took dollars home." The RBI may be forced to raise interest rates as the weak rupee and higher fuel costs raise inflation rates, wrote Andy Mukherjee. The RBI's "balance sheet shows the amount of government paper (including treasury bills) held as on 28 February was Rs 21.34 trillion. It was Rs 15.58 trillion in March 2025." "An increase of this scale has never been witnessed earlier." The RBI transferred Rs 2.69 trillion as surplus to the government , and this "together with RBI's net incremental holdings of government paper, the sum of Rs 8.45 trillion is equivalent to 54% of the fiscal deficit for 2025-26," wrote Madan Sabnavis. Clearly, the RBI is monetizing government debt. "Even when the Federal Reserve prints more currency, there is still a global demand for the US dollar. However, the same will not be the case for the rupee. Thus, when there is excess supply of the currency, it could lead to a fall in rupee value, leading to an outflow of foreign investment," wrote Deepti Mary Mathew. "Net foreign direct investment (FDI) fell from some $40 billion in 2020-21 to about $350 million last year." Indian companies are investing abroad and foreign investors are cashing out. "High-profile exits - Citibank, Allianz, Ford, MG Motors, Hyundai's stake in Ola, Whirlpool, Holcim. BAT and others" "are selling assets, booking profits and reallocating capital to other markets, especially the US, which is now the world's most attractive FDI destination," wrote Ajit Ranade. Even Indian dealers are not buying the fantastic story. The yield on the benchmark 10-year GOI bonds is at 6.981% this morning, down from 7.043% one month ago. ininvesting. com. Perhaps our CEA should ask the RBI why the rupee is sick instead of blaming AI. Foreigners can flee. We can't.