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Despite the weak rupee, there is no sharp growth in India’s goods exports, due to which both the government and the industry are worried. High US tariffs, expensive input costs and sluggish global demand have completely reduced the gains from the rupee’s decline. Experts say that unless cost pressure and trade barriers are reduced, even a weak rupee will not be able to boost exports.
New Delhi. The rupee has been witnessing a continuous decline for some time now. The rupee has fallen from around Rs 60 in 2013 to around Rs 90 per dollar by 2025. But despite this, there was no sharp growth in India’s goods exports. While exports were $313 billion in 2013, they will only increase to around $440 billion in 2024-25. Generally, a weak currency makes exports cheaper and more competitive. But this time, high inflation, rising input costs and especially American tariffs have almost wiped out the benefits of rupee depreciation. Along with this, weak global demand has made the situation more challenging.
Weak rupee’s gains snatched away by inflation and tariffs
Experts say that the exporters are not getting that much real gain as the rupee generally appears to be falling, because inflation has not allowed the Real Effective Exchange Rate to come down. This financial year, high American tariffs have worsened the situation, due to which the cost of India’s exports has automatically increased. According to Emkay Global analyst Riya Singh, when 25–50 per cent tariffs are imposed in the US market, a 1–2 per cent decline in the value of the rupee does not provide much benefit. Many exporters in India require large quantities of imported raw materials for their production, which becomes more expensive due to the weak rupee. This affects their margins and also reduces competition.
Increasing trade deficit and sluggish global demand increased difficulties
The situation remains weak even in the latest trade data. India’s merchandise trade deficit increased to $41.68 billion in October, whereas it was $32.15 billion in September. The sharp rise in gold imports and falling demand in the American market further weakened exports. In the April–October period, exports remained almost flat at $254 billion, but imports increased by 6.4 percent to $451 billion. According to experts, the weakness in the global markets is such that buyers are reducing orders and are not even ready to make deals at lower prices. In such an environment, the fall of the rupee makes it almost impossible to grow exports.
Hope from reforms, but currently no relief for exporters
Apart from the challenges of tariffs, standards and logistics, India’s high-cost manufacturing infrastructure also weakens the rupee’s competitiveness. Ajay Srivastava of GTRI says that India’s problem is not of overvalued rupee, but of over-regulated and expensive production system. However, several quality control orders have recently been lifted, GST rates have improved and progress on labor reforms is also visible, which is expected to provide further relief to the export sector. But at present the situation is such that the benefits of weak rupee are being completely eaten up by tariffs, input costs and global slowdown. According to experts, unless demand improves and costs come down, there is little possibility of exporters getting any major benefit from the rupee’s fall.
