Even as the rupee closed at a new historic low of 86.58 against the US dollar on Monday, the steepest single-day fall in nearly two years, economists maintained that this was an adjustment that was both warranted and inevitable. The rupee is overvalued and there is a need for the Reserve Bank of India to step back a bit and let it adjust, they said.
For exporters, this could be a boon, but a lot will depend on movements of the currencies of countries that are competing with India. The export sectors that can hope to reap benefits are those where the local content dominates like cotton textiles, leather and agriculture products. This augurs well as the share of some of the labour-intensive sectors in India’s exports has been falling.
Expectations of a further depreciation and the three-month forward rates that are around Rs 70 to a dollar can allow space for exporters negotiating new orders to offer better rates, analysts said. “India’s basic balance of payments deficit is widening when portfolio inflows and the domestic economy have slowed. The rupee is overvalued,” said Dhiraj Nim, economist at ANZ Research.
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Compared with Southeast Asian currencies, the rupee remains relatively stable, but its moves are now increasingly in line with regional currencies. The rupee’s earlier stability against depreciating regional peers over 2024 had resulted in bilateral appreciation and loss of competitiveness, Nim observed. “In the calendar year 2025 so far, the rupee has depreciated 1% against the dollar, ranking 3rd among 23 emerging market peers,” Garima Kapoor, an economist at Elara Securities, said.
Engineering Export Promotion Council chairman Pankaj Chadha said: “Only beneficiary of the falling rupee would be exporters who are getting payments now or are shipping out orders contracted earlier. Those who have not hedged their receivables may reap a windfall. However, such gains typically last for 10-120 days only, as in new contracts, buyers will drive down prices based on the exchange rate outlook prevailing then.”
“Those who have made advance billing of rice exports would immensely benefit from a decline in the value of the rupee against the dollar,” said Vijay Setia, managing director, Chaman Lal Setia exports,
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