CURRENT AFFAIRS | 31 MARCH 2026
CLAT GK + ECONOMIC AFFAIRS & LEGAL FRAMEWORK
– RBI functions, currency management, forex reserves
– Article 112 (Budget), Article 292 (Borrowing), Entry 36 Union List (Currency)
– SEBI Act 1992, FEMA 1999, RBI Act 1934
– FPI regulation and capital market framework
– Finance Commission (Article 280)
What Happened to the Rupee?
On 30 March 2026, the Indian rupee breached the 95-per-dollar mark, touching an intra-day low of 95.24 before settling at 94.81 on the last trading day of FY26. This marks the worst year for the rupee since FY12, with a 9.85% depreciation. The month of March alone saw a 4.22% decline — driven primarily by the escalation of the Iran war and massive Foreign Portfolio Investor (FPI) outflows.
The Sensex dropped 2.22% (1,636 points) to close at 71,948 — its lowest since February 2024. Total market capitalisation of BSE-listed firms shrank by Rs 51.1 trillion during the month.
Key Numbers: The March 2026 Meltdown
| Metric | Data |
| FPI outflow (March) | Over Rs 1.12 lakh crore ($13 billion) — record |
| Rupee depreciation (FY26) | 9.85% (worst since FY12) |
| Sensex close (30 Mar) | 71,948 (-2.22%) |
| Crude oil (Indian basket) | Up to $157/barrel (from $60) |
| Forex reserves decline | $30 billion in March (RBI sold $16 billion) |
| Market cap erosion | Rs 51.1 trillion (Rs 461.3T to Rs 412.2T) |
| Gold imports surge | 349% rise in January 2026 |
Why Did the Rupee Crash?
Four major factors converged to create the perfect storm:
- Iran war escalation — Crude oil prices surged from $60 to $120/barrel, with the Indian basket hitting $157. India imports over 80% of its crude oil, making it highly vulnerable to oil shocks
- FPI exodus — Record monthly outflow of over Rs 1.12 lakh crore, surpassing the previous high of Rs 91,983 crore in October 2024. FPIs sold across equity and debt segments
- RBI forex depletion — Forex reserves fell by $30 billion in March, with RBI selling $16 billion to defend the rupee. Despite this, the currency continued sliding
- Global risk-off sentiment — Nikkei fell 4%, FTSE dropped 1%, DAX declined 2.1%. Global investors shifted to safe-haven assets (US Treasury, gold)
Impact on India’s Economy
The rupee’s decline has cascading effects across the economy:
- Fertiliser imports — India has sufficient stocks but costs are rising sharply, potentially increasing the subsidy burden on the Budget
- LNG purchases — Spot LNG prices are 70% higher, increasing energy costs for power plants and industry
- Current account deficit — Expected to widen significantly due to the oil import bill
- Inflation risk — Imported inflation through higher fuel and commodity prices
Constitutional and Legal Framework
– Article 112 — Annual Financial Statement (Union Budget) laid before Parliament
– Article 292 — Government of India may borrow on the security of the Consolidated Fund, within limits fixed by Parliament
– Article 280 — Finance Commission recommends distribution of taxes between Centre and States
– Entry 36, Union List — Currency, coinage, and legal tender; foreign exchange (exclusive Central subject)
– RBI Act 1934 — Establishes the Reserve Bank as India’s central bank; manages monetary policy and forex reserves
– SEBI Act 1992 — Regulates securities market and FPI investments
– FEMA 1999 — Foreign Exchange Management Act; replaced FERA 1973; governs all forex transactions
RBI’s Response: NOP Limits
The RBI imposed new limits on onshore positions of banks — capping the Net Open Position (NOP-INR) for banks at USD 100 million, with compliance required by 10 April 2026. However, the impact was short-lived as corporates exploited arbitrage between onshore spot markets and non-deliverable forwards (NDFs).
– GK: RBI functions (monetary policy, forex management, banker to government), FPI regulation under SEBI, oil import dependency
– Legal Framework: FEMA 1999 vs. FERA 1973 (management vs. regulation approach), SEBI’s FPI regulations
– Constitutional Provisions: Art. 112 (Budget), Art. 292 (borrowing powers), Entry 36 Union List (currency as Central subject)
– Current Affairs: Iran war impact on Indian economy, record FPI outflows, rupee’s worst year since FY12
R — RBI forex reserves depleted ($30 billion in March)
U — Unrest in Iran (war driving oil prices)
P — Portfolio investors (FPIs) fleeing ($13 billion outflow)
E — Energy costs surging (crude $60 to $157)
E — Equities crashed (Sensex at 2-year low, Rs 51T market cap lost)
Source: Business Standard, The Week, BusinessToday — March 2026
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Practice Quiz — 10 CLAT-Style Questions
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