Falling rupee makes imports costlier, fuels inflation: Experts
A depreciating rupee will help exporters and the IT sector, but make imports costlier, thus fuelling inflation, according to experts.
As the rupee plunged below 90-mark to a US dollar, opposition parties raised concern over its impact on common citizens. The matter was also raised in Parliament.
The rupee rebounded from its all-time low levels and appreciated by 19 paise to close at 89.96 against the US dollar on Thursday, on softness in the US dollar index and on reports of the Reserve Bank of India's supposed intervention.
Forex traders said the greenback fell after ADP non-farm payroll data came in sharply below the forecast, and the softness in the US dollar index supported the rupee at lower levels.
The rupee opened weak earlier in the day and touched an all-time low of 90.43 amid selling pressure from foreign investors and rising crude oil prices. The delay over the announcement of the India-US trade deal has also weighed on the rupee.
“The rupee’s fall below 90 against the dollar brings mixed consequences. While export sectors like IT and textiles gain competitiveness, higher import costs for crude and raw materials will squeeze margins and widen the trade deficit,” said Rajeev Sharan, Head, Criteria, Model Development & Research, Brickwork Ratings.
He also said that rising inflationary pressures could dampen consumer demand and corporate profitability, while firms with unhedged foreign borrowings may face financial stress.
Prodigy Finance, an international student lender, said students who are going for higher studies abroad in 2026 will run into a tougher reality.
The combination of a weakening rupee, rising overseas living costs and underestimated budgets is creating a financial risk that families can no longer ignore, it said.
When tuition fees, deposits, and day-to-day living costs abroad are priced in dollars, pounds, or euros, an Indian rupee (INR) loan becomes heavier with every movement in the exchange rate. What looks manageable today can turn into an unexpected financial strain by the time repayments begin. “The one piece of advice I always give is simple: do not pledge your home or land as collateral. You never know what the market will look like back home,” said Sonal Kapoor, Global Chief Business Officer at Prodigy Finance.
Meanwhile, a report by DBS Bank said that in the past fortnight, the central bank’s strong presence across spot, forwards and the NDF markets had prevented a break in the USDINR past 89.00, drawing a de facto line in the sand.
