A sharply depreciating rupee may offer some tailwinds to exporters and the IT sector, but costly imports could pinch households, squeeze businesses and fuel inflationary pressures across the economy.
The currency briefly breached the 90-per-dollar mark on Thursday before recovering to close at 89.96, supported by a softer US dollar index and suspected intervention by the Reserve Bank of India. Earlier in the day, the rupee had hit a historic low of 90.43 amid sustained foreign portfolio outflows, rising crude prices and uncertainty surrounding the long-delayed India–US trade deal.
India’s heavy dependence on imported crude oil, vegetable oils, fertilisers and gems and jewellery means that a sustained downturn in the rupee could filter into retail prices. Fuel and imported goods are expected to become costlier, while manufacturers reliant on imported components may raise prices to protect margins. Retail inflation eased to 0.25 per cent in October owing to softer food prices, but headline CPI could come under pressure if the currency weakens further.
Electronics, which rely extensively on imported parts, may also see higher input costs. The auto sector — particularly brands such as Mercedes-Benz, BMW, Audi, Jaguar Land Rover and Volvo that sell fully imported units — may be compelled to re-evaluate pricing as import bills rise. MSMEs that are dependent on imported machinery and raw materials could also face a margin squeeze.
The impact extends beyond consumption, affecting education loan repayments and foreign travel. International student lender Prodigy Finance cautioned that students planning to study abroad in 2026 face higher expenses as depreciation inflates foreign-currency loan repayments. Families should avoid pledging homes or land as collateral, said Sonal Kapoor, the firm’s global chief business officer.
“The fall below 90 brings mixed consequences,” said Rajeev Sharan of Brickwork Ratings, noting that while export competitiveness improves, import-led inflation and wider trade deficits could weaken corporate profitability. Firms with unhedged foreign borrowings may also come under stress.
A city-based importer noted that forward contracts offer temporary relief but warned that the duration of the currency’s slide remains uncertain.
Opposition leaders intensified criticism of the government. Congress president Mallikarjun Kharge recalled PM Narendra Modi’s past attacks on the UPA over currency weakness, while Rajya Sabha MP Vivek K. Tankha described the rupee’s fall as “economic pain” equivalent to a “salary cut” for households.
Limited RBI scope
With the Monetary Policy Committee’s three-day meeting concluding on Friday, the rupee’s depreciation is expected to feature prominently in the deliberations. However, economists anticipate little scope for decisive action beyond selective intervention.
“While rupee depreciation will be central to discussions, we do not expect a rate cut,” said Soumya Kanti Ghosh, group chief economic adviser, SBI, in a report. He expects the RBI to provide clarity on liquidity management rather than alter policy rates, noting that deposit rates cannot be reduced further.
Axis AMC said the concern around the rupee’s weakness is rooted in two ‘Ts’ — a widening trade deficit and tariff-related uncertainties — issues beyond the scope of monetary policy.