Weaker Rupee to Push India's Import Bill? GTRI Answers

The weaker Indian Rupee (INR) is expected to push up the country’s import bill, primarily due to rising payments for key commodities such as crude oil, coal, vegetable oil, gold, diamonds, electronics, machinery, plastics, and chemicals, according to a report by the Global Trade Research Initiative (GTRI) released on Friday.

Impact on Gold Imports

The GTRI highlighted that the depreciating rupee will lead to higher import costs for gold, with global prices rising by 31.25%. The price of gold has surged from USD 65,877 per kilogram in January 2024 to USD 86,464 per kilogram in January 2025. As the INR weakens, the price in rupee terms will continue to climb, exacerbating the burden of gold imports.

Rupee Depreciation Trends

Since January 16, 2024, the INR has weakened by 4.71% against the US dollar, falling from Rs 82.8 to Rs 86.7. Over the past decade, the rupee has depreciated by 41.3%, from Rs 41.2 in January 2015 to Rs 86.7 in January 2025.

In comparison, the Chinese Yuan has depreciated by just 3.24% during the same period, from Yuan 7.10 to Yuan 7.33.

Inflation and Economic Pressure

GTRI founder Ajay Srivastava warned that the weakening rupee would inflate import bills and raise energy and input prices, leading to an overheated economy. Despite the conventional belief that a weaker currency would boost exports, India’s export data over the last decade paints a different picture.

Contradictory Impact on Exports

Historically, a weaker currency is thought to make a country's exports more competitive. However, GTRI’s analysis of India’s export data from 2014 to 2024 challenges this notion. During this period, overall merchandise exports grew by 39%, but high-import sectors like electronics, machinery, and computers saw much higher growth. Electronics exports surged by 232.8%, while machinery and computer exports grew by 152.4%.

In contrast, low-import sectors like textiles and clothing, which should have benefitted from a weaker rupee, experienced negative growth. This suggests that a weaker rupee does not always lead to an increase in exports and may harm labor-intensive sectors.

Rethinking Trade and Currency Strategies

GTRI recommended that for India to achieve long-term economic stability, the country must strike a balance between economic growth and inflation control. It also emphasized the need for a reassessment of rupee management and trade strategies.

Ajay Srivastava added that India's foreign exchange reserves, which total $600 billion, are largely tied up in loans and investments due for repayment with interest, limiting their ability to stabilize the rupee effectively.