Buckling under these external pressures, the rupee has dropped 15 percent of its value against the dollar this year and is currently the worst-performing currency in Asia.
But economists at Capital Economics predict the rupee will fall further against the US greenback by the end of next year – off the back of the US economy.
The Federal Reserve raised US interest rates for a third time this year, by 0.25 points to a range of 2 to 2.25 percent.
Oliver Jones, Markets Economist at Capital Economics, forecast the US economy will likely remain in good health, with the Fed continuing to raise rates once a quarter.
But by the middle of next year, Mr Jones predicted the Fed will stop hiking rates with the US economy slowing, causing the US stock market to fall.
Mr Jones told Express.co.uk: “Admittedly, we think that the Fed will stop hiking rates in the middle of next year, a bit sooner than investors are anticipating.
“But that is only because we think that the US economy will slow quite sharply, causing the stock market there to fall sharply.
“Past form suggests that emerging market currencies, including the rupee, tend to struggle when the US stock market comes under pressure, as investors retreat from risky assets more generally.
“We suspect that this will be the case this time around too.”
He continued: “We forecast that the rupee will fall further against the dollar by the end of next year.
“The slide in the rupee against the dollar this year mostly seems to reflect the factors which have been weighing on emerging marker currencies more generally.
“India’s economy itself has been performing pretty well, allowing its central bank to raise interest rates twice.
“The key driver has probably been rising interest rate expectations in the US, which have put pressure on most emerging markets currencies.
“The Indian rupee has been hit a bit harder than many of its peers because India has a larger current account deficit than most other emerging markets.
“But clearly it is not in the same league as the worst-affected countries, Turkey and Argentina, who had far larger deficits and whose currencies have collapsed.”
The Reserve Bank of India went against predictions from financial analysts as it held interest rates at the start of October.
The RBI’s monetary policy committee (MPC) left the repo rate unchanged at 6.50 percent, with five out of six panel members voting to hold the rate
In its policy statement, the bank said: “Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook.”
Defending the decision, the bank said it was acting “to further strengthen domestic macroeconomic fundamentals”.
The Prime Minister of India has issued a desperate call to oil producers to review payment terms to help ease concerns of soaring oil prices.
Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year’s largest weekly build in US crude stockpiles.
India currently imports more than 80 percent of its oil needs.