Rupee's Plunge Past ₹90 Signals Deeper Indian Import Woes

Rupee's Descent Signals Structural Weakness

The Indian rupee has breached the ₹90 mark against the US dollar, a move that analysts say signals more than just sentiment or speculation. It underscores a persistent structural reality: an economy heavily dependent on imports and insufficiently integrated into global production chains through exports.

Import Dependence Fuels Inflation

This depreciation directly translates into higher costs for essential imports, including crude oil, edible oils, fertilizers, and pharmaceutical intermediates. These are not discretionary items; they are fundamental to national security and production. The immediate impact is rising inflation, squeezing households and businesses long before any potential export benefits materialize.

The Pulse of the Problem

The cost of essential food imports dramatically illustrates the rupee's real impact. For instance, pulse imports valued at $5.14 billion in 2024 would have cost approximately ₹30,840 crore at an exchange rate of ₹60 per dollar. However, at ₹90 per dollar, the same imports surged to ₹46,261 crore, adding an extra ₹15,420 crore burden without any change in global prices or quantities. This exchange rate effect alone added over ₹9,200 crore to the import bill in 2023.

Not an Export Advantage

While a weaker currency theoretically boosts exports, India's situation is complicated. The manufacturing sector's heavy reliance on imported inputs – such as electronic components, chemicals, and active pharmaceutical ingredients – means higher input costs often negate any price advantage. Small and medium enterprises, in particular, struggle with limited pricing power and currency hedging options, leading to margin compression rather than output expansion.

Structural Divergence from Global Peers

Unlike economic powerhouses such as China, which possess deep domestic value chains and a higher share of global exports, India lacks comparable buffers. China's integrated production systems allow for currency depreciation without igniting domestic inflation. India, with shallower manufacturing depth and a more modest global export share, experiences structurally divergent outcomes from similar exchange rate movements.

Earning Stability Through Transformation

Currency depreciation becomes manageable, even beneficial, only when inflation is controlled, exports boast high domestic value addition, import dependence on essentials is low, and external accounts are financed by stable capital flows. These conditions require sustained structural transformation, which India has yet to fully achieve. Until domestic production capacity deepens, reliance on imported essentials wanes, export ecosystems strengthen, and inflation expectations are anchored, the rupee will continue to transmit stress.