The falling rupee is also dragging down businesses along with it

Your loss, someone else’s gain.
Your loss, someone else’s gain.
Image: AP Photo/Aijaz Rahi
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Last week, for the first time ever, the rupee closed above the crucial 70 mark against the dollar.

Since then it has recovered slightly but if global macroeconomic conditions don’t improve, it may even fall to Rs72, experts believe. A five-year-high trade deficit, the difference between a country’s exports and imports, is piling pressure on the domestic front.

Asia’s worst-performing currency has already lost over 9% this calendar year.

Earlier this year, higher crude oil prices, the trade deficit, and the exit of foreign investors from India pulled the rupee down. Then global headwinds, including the US’s protectionist measures against countries like Turkey and China, spooked currencies in emerging markets, including India.

While most businesses were hit, certain segments benefited. Here are some of the losers and gainers.


It has been a double whammy for sectors dependent on crude oil.

Fuel prices had been spiraling up earlier this year, too, and companies had to shell out more. However, prices stabilised relatively and even declined around mid-year. But then the rupee began to slide. Since India imports most of its crude oil requirement, this has kept their import bills inflated.

The Indian aviation industry, for instance, has seen aggregate losses of around Rs2,500 crore ($364 million) in the financial year 2018 so far. The rupee’s decline has only worsened things.

India’s biggest airline, IndiGo, saw net profits plummet by 97% year-on-year to Rs28 crore during the April-June quarter, as crude oil prices increased and the rupee depreciated. Similarly, SpiceJet reported a net loss of Rs38 crore in the quarter ended June, after 13 consecutive quarters of profitability.

“The aviation turbine fuel cost in July-August is about 40% higher than what it was last year and since prices are benchmarked against the exchange rate, the cost goes up even further,” said Anand Kulkarni, assistant vice-president at credit rating agency ICRA. “Apart from the fuel cost, even the upkeep cost increases as most of the aircraft maintenance is done outside the country. Then, a lot of these planes may be leased and the payments also have to be done in foreign denominations if the lessor is outside the country, which squeezes margins further.”

The rupee’s slide may also throw a spanner in the works for telecom companies. Considering that the industry imports a lot of its equipment and machinery, it may affect their growth plans.

Smartphone makers are already mulling a hike in phone prices in the face of a depreciating rupee.

“Looking at the market scenario at the moment, with the increase of dollar, which is expected to rise even further, the cost incurred on mobile handsets will increase and will lead to an overall hike in the final cost of the handsets,” Nidhi Markanday, director of New Delhi-based Intex Technologies (India), told news agency Press Trust of India.

A similar scenario may also play out in the consumer durables segment, leading to higher costs of refrigerators, televisions, and other appliances.

Other sectors such as FMCG, paints, steel, etc. will also suffer. This is besides the many oil marketing firms that will be hit.

For individuals, travelling and studying abroad will cost more.


Indian exporters in the IT, pharma, auto, and other sectors may have some reason to cheer.

“This sudden value depreciation of rupee is good to support exporters and to attract long-term foreign direct investments to support the ‘Make in India’ agenda, which has not yet taken off, one of the reasons being the strong rupee value,” said Moses Harding John, CEO of India and East Africa at SBM Holdings, a financial service provider.

The depreciation comes as a much-needed breather for the IT services companies that chiefly export services from India.

“The industry has been under intense pressure on the back of reduced contract value (and margins) due to automation, increased cost of operation, the need to invest in new countries, and the growing sense of protectionism in crucial markets like US and UK,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research.

However, their gains will be capped since they hedge against the dollar and allow for flexibility in contracts to adjust for such changes. So they will not be able to use the upside of such rupee movements in the short-term, added Gogia.

Since many exporting sectors also import a lot of items, the net gains may be limited.

Besides, since currencies in other emerging markets have also weakened, there will be increased competition. “Apart from these issues, even the buyers in other countries start asking for rebates and discounts as they realise they have to shell out more for the same product. Overall, there may be some benefit to exporters but not too much,” explained A Sakhtivel, regional chairman of the Federation of Indian Export Organisations.

Inbound tourism and remittances may also get a boost due to the depreciating rupee.

Now, the only hope for the currency is if the government and the Reserve Bank of India step in. “If certain measures are taken then we can expect the rupee to pull back to Rs68.40 per dollar by the end of this financial year,” said Devendra Kumar Pant, chief economist at India Ratings.