A falling rupee and the rising economic challenge

The rupee at 90.43 is a wake-up call. It tells us that global winds can blow harshly and that we cannot take stability for granted. We must act with resolve, planning and foresight. If we do that, the currency slump can become a catalyst, i.e., a reason to build a stronger and more resilient economy – Siddharth Roy 

The recent slide of the rupee to a record low of 90.43 against the US dollar is more than a financial statistic. It is a warning bell for millions of Indians. On the surface it may seem like a number for traders to argue about. But in reality it has deep consequences for everyday life, for prices, for national economic health, and for the hopes of ordinary people.

When the rupee weakens sharply, foreign goods and services immediately become more expensive. Essentials such as fuel, medicine, imported food items, electronics, machinery and raw materials suddenly cost more in rupee terms. For many families that means tightening the budget, cutting down on non-essentials and perhaps even facing hardship. For businesses that depend on imported components, the costs rise sharply, which can force them to raise prices or absorb losses. In either case ordinary consumers are likely to pay more.

Our country depends heavily on importing crude oil and other energy supplies. With a weaker rupee, the bill for these imports swells. The result is more pressure on the current account deficit and possibly a heavier burden on government finances. Utility bills, transport costs and prices of goods that use fuel or energy in production all go up. Inflation, already a concern for many, may surge further. That hurts not only urban middle-class families but also poorer households whose income leaves little room for additional expenses.

At the same time, companies reliant on imports for raw materials or technology face disrupted planning. Some may try to hedge against currency risk, but many smaller firms may be unable to absorb such costs, forcing them either to raise prices or incur losses. Higher costs of production often result in fewer jobs, slower hiring and even delays in growth plans, especially in manufacturing and industries that depend on imports.

Businesses that export goods and services may find a silver lining. A weaker rupee means their products become cheaper in the global market. That makes our exports more competitive. Sectors like software services, textiles or other export-orientated industries could benefit. More demand from foreign buyers might bring in valuable foreign exchange and improve trade balance. Over time this could help stabilise the currency.

But relying solely on exports and hoping that they offset the damage is risky. The rupee drop reflects deeper structural vulnerabilities. External factors such as global interest rates, flows of foreign investment, geopolitical tensions and demand for the dollar all play a role. India’s dependence on imports like energy, raw materials, and machinery makes us particularly vulnerable.

To respond effectively, the country needs a long-term plan. We must reduce dependence on foreign imports. We must expand domestic manufacturing for goods like machinery, electronics, medical supplies, renewable energy components and other goods that we currently import in large quantities. That will help reduce pressure on our foreign exchange and make our economy more self-reliant.

We must also encourage export industries, not just with occasional incentives but through stable policies, ease of doing business, and high-quality standards. Exporting services or products is not enough if we cannot offer reliability, quality and competitiveness. Government and industry must collaborate to make exports efficient, timely and world-class.

Foreign investment remains important, but investors care about stability. Frequent currency swings and a weak rupee scare many away. To attract capital we need clear policies, stable macroeconomic management, low inflation and a predictable regulatory environment. Confidence is as important as capital.

For households and individuals it might help to think long term. Save carefully. Avoid unnecessary foreign currency exposure unless essential. Diversify investments in assets that can protect against inflation. When planning big expenses or investments, factor in currency risk.

Media, civil society, analysts and economists must keep pushing the conversation beyond panic headlines. We must emphasise not just the weaknesses but also the path forward. Citizens must understand that a weak rupee is serious. It affects daily life and long-term prospects. But it also gives us a chance to rethink our priorities, to build up local manufacturing, to strengthen exports and to reduce dependence on volatile foreign markets.

The Reserve Bank of India now needs to act with a mix of calm and clarity. It must use its foreign exchange reserves carefully to prevent sharp swings in the rupee rather than trying to fix a specific level. The RBI should continue targeted interventions, keep liquidity stable and send strong signals that inflation will be controlled. At the same time, it must work closely with the government to support exports and attract more long-term investments into the country.  

The rupee at 90.43 is a wake-up call. It tells us that global winds can blow harshly and that we cannot take stability for granted. We must act with resolve, planning and foresight. If we do that, the currency slump can become a catalyst, i.e., a reason to build a stronger and more resilient economy.

Our moment of discomfort today could become the foundation for a more secure tomorrow.

(The author can be reached at siddharth001.roy@gmail.com)