Indian Rupee at ₹90.60: Why India Inc Should Be Genuinely Concerned

The Indian rupee at ₹90.60 per dollar is not just another headline number. It marks a phase where currency weakness starts to affect businesses, investors, and policymakers in tangible ways.

Since the US elections, the rupee has emerged as one of the worst-performing emerging market currencies. This is no longer a short-term fluctuation. It is turning into a macro challenge that India Inc cannot afford to ignore.

How Weak Is the Rupee, Really?

In absolute terms, the rupee has depreciated by 6.9% against the US dollar. But the more telling metric is the Real Effective Exchange Rate (REER).

In REER terms - which measure India’s currency competitiveness against a basket of trading partners - the rupee has fallen by 9.2%. That signals a meaningful loss of purchasing power and competitiveness, not just a technical move on currency charts.

This matters because REER captures inflation-adjusted weakness. In simple terms, India is becoming more expensive globally, even as its currency weakens.

Impact #1: Dollar Valuation Takes a Hit

One of the most immediate consequences of a weak rupee is its impact on valuations in dollar terms.

Global GDP comparisons are done in dollars. When the rupee weakens, India’s GDP shrinks in dollar terms - even if it continues to grow in rupees.

This is one reason India’s $5 trillion GDP target, once aimed for 2028, is now increasingly being pushed closer to 2031. Currency weakness silently erodes dollar wealth.

The same applies to equity markets. Market capitalisation may rise domestically, but Indian markets can still underperform globally when measured in dollars.

Impact #2: Dollar Liabilities Become Costlier

For corporates, this is the most direct and painful impact.

Several key sectors in India depend heavily on dollar-denominated imports:

• Oil refining and energy
• Jewellery and gold imports
• Electronics and mobile phone manufacturing

When the rupee weakens, import costs rise instantly. Margins get squeezed unless companies pass costs to consumers.

Then there is foreign currency borrowing. While external debt has reduced over time, an unhedged portion still exists. Market experts warn that if the rupee crosses ₹91 per dollar, companies may rush to hedge - adding further pressure on the currency.

Impact #3: Imported Inflation Risk

India has historically run a merchandise trade deficit. While services exports help, they do not fully offset the gap. This leaves India exposed to imported inflation.

When the rupee weakens and domestic demand stays resilient, global exporters often pass their inflation into India through higher prices.

This does not show up immediately. But over time, it leads to:

• higher domestic inflation
• lower consumer confidence
• erosion of purchasing power

Soft crude oil prices have helped cushion the impact so far. But that relief may not last indefinitely.

Impact #4: Capital Flows Under Pressure

India still relies on foreign capital flows to bridge gaps in its fiscal and current account balances. A weak rupee complicates that equation.

Here’s the math foreign investors care about:

If an investor earns 10% on Indian equities but the rupee depreciates by 6%, the effective dollar return is just 4%.

That is why FPIs tend to turn cautious when the rupee weakens. Over the last four years, FPIs have largely been net sellers in Indian equities.

Debt inflows picked up mainly because of India’s inclusion in global bond indices - not because currency risk disappeared.

Historically, capital outflows have often triggered a domino effect for India: weaker currency, lower inflows, and tighter financial conditions.

Why India Inc Should Be Concerned Now

A weak rupee does not hurt overnight. It works slowly through balance sheets, margins, valuations, and confidence.

For India Inc, sustained currency weakness means:

• higher input costs
• pressure on profitability
• lower dollar valuations
• greater funding uncertainty

This is not a short-term trading issue. It is a macro risk that needs careful management - both at the corporate and policy level.

Key Takeaways

• The rupee at ₹90.60 is among the weakest EM currencies post US elections.
• REER depreciation of 9.2% signals loss of competitiveness.
• Dollar liabilities and import costs rise sharply with a weak rupee.
• Imported inflation risks are building beneath the surface.
• Currency weakness reduces dollar returns for FPIs, impacting capital flows.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment or currency advice.