THE RUPEE IS FALLING. WHO’S REALLY PAYING THE PRICE?

 

BIZ MASALA

BUSINESS  |  MARKETS  |  ECONOMY


India’s currency is under pressure. But the bigger story is what companies, consumers and the RBI are doing about it.

By Murthy ASR  |  5 October 2026

The rupee problem has entered the boardroom

The Indian rupee is weakening. But perhaps the clearest warning isn't on a currency-trading screen. It is in corporate India.

In September, Indian importers booked nearly $77 billion of currency hedges — a record monthly amount and more than 80% higher than a year earlier. Exporters booked about $41 billion.

The message is unmistakable: companies that need dollars are increasingly paying to protect themselves against a weaker rupee.

Who ultimately pays when the rupee falls?




₹96 to the dollar — and counting

The rupee closed around ₹96.29 to the US dollar on October 5 and has lost roughly 6.5–7% against the dollar this year.

Several forces are working against it: a stronger dollar, elevated crude-oil prices, global bond yields and foreign selling of Indian assets.

The RBI can smooth the movement by selling dollars from its reserves. But it cannot control every force driving the global currency market.

Why importers are worried

Consider an Indian company that needs to pay a US supplier $100 million.

Exchange rate

Rupee cost

₹95 / $

₹950 crore

₹100 / $

₹1,000 crore

The supplier hasn't raised its price. The company hasn't bought anything more. The difference comes entirely from the exchange rate.

Companies have three basic choices: absorb the cost, pass it on through higher prices, or hedge it against currency movements. Corporate India is increasingly choosing the third option.

Then the rupee reaches the consumer

If imported inputs become more expensive, companies can eventually raise prices. Not every rupee of depreciation becomes inflation: businesses can absorb costs, change suppliers, improve efficiency or use hedges.

But persistent currency weakness makes the calculation harder. India's latest official data show August headline inflation at 4.82%, while food inflation was 5.95%.

 

A weaker rupee can travel through imported inputs, oil and ultimately household prices.

Then there is the oil problem

Crude oil is priced internationally in dollars, while India pays for it in rupees converted into dollars.

Higher oil prices + weaker rupee = higher import costs.

Brent crude was around $101–103 a barrel on October 5 amid continuing geopolitical and supply concerns.

Not everyone loses

A weaker rupee can benefit Indian companies earning dollars. That can help exporters in IT services, pharmaceuticals, engineering and other internationally oriented businesses. But even exporters are not simply celebrating.

They may import raw materials or components themselves. And the fact that exporters also booked around $41 billion of hedges in September shows that they are managing uncertainty rather than betting blindly on further rupee weakness.

The RBI’s dilemma

India's foreign-exchange reserves were around $747.6 billion in the week ended September 25. The RBI has considerable firepower, but intervention cannot permanently defeat global forces.

Nearly 60% of economists polled by Reuters expect a 25-basis-point RBI rate increase, potentially taking the repo rate from 5.25% to 5.50%.

Higher rates may support the currency, but they also make borrowing more expensive for households and companies.

The ₹100 question

Will the rupee cross ₹100 to the dollar? Nobody knows.

The important signal is not whether ₹100 arrives tomorrow. It is that corporate India is already spending billions to protect itself against further weakness.

That tells us businesses are preparing for a world in which the rupee may remain under pressure for longer.

BIZ MASALA VIEW
The rupee story is no longer just a currency-market story. It has entered the boardroom. The real challenge is managing a weaker rupee without allowing currency pressure to become an inflation problem, an investment problem — and eventually a household problem.

The numbers that matter

Indicator

Latest signal

Rupee

₹96.29 / $

Rupee decline in 2026

6.5–7%

Importer hedges — September

$77 billion

Exporter hedges — September

$41 billion

Forex reserves

$747.6 billion

August CPI inflation

4.82%

August food inflation

5.95%

Q1 FY27 GDP growth

7.8%

Possible RBI rate hike

25 bps

Sources: Reserve Bank of India; Ministry of Statistics & Programme Implementation; Reuters reporting and surveys; market and clearing-house data reported by financial media.

Editorial note: Hedging activity is a measure of corporate risk management, not a guaranteed prediction of future exchange-rate levels.

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