From electronics to EVs, rupee’s record plunge risks rise in prices of some items

The Indian rupee has depreciated by over 5 percent this year, despite India’s strong macroeconomic fundamentals, including robust growth and low inflation. The country recorded a GDP growth of 8.2 percent in the second quarter, while retail inflation for October fell to a historic low of 0.25 percent. Although the Reserve Bank of India (RBI) is not overly concerned about the currency’s decline and continues to focus on controlling volatility rather than targeting a specific exchange rate, the upcoming monetary policy decision on December 5 will be closely observed for any guidance regarding the rupee’s weakness.

RBI Governor Sanjay Malhotra has previously noted that a 3–3.5 percent annual depreciation aligns with historical norms. Nevertheless, imported goods could see price pressures, particularly items such as electric vehicle components, white goods, electronics, and mobile phones, as input costs rise with a weaker rupee. Overseas education and foreign-currency borrowings may also become more expensive. Crude oil imports, which constitute 80–85 percent of domestic requirements, could inflate costs for companies and impact OMC margins. Similarly, India’s fertilizer subsidy bill could increase due to dependence on imports.

Chief Economic Advisor V. Anantha Nageswaran emphasized that the current depreciation is not alarming, as it supports exports, helps India remain competitive, and is a natural part of financing growing imports and investments. He added that the rupee is expected to recover next year without harming inflation or trade.