The recent depreciation of the Indian rupee has rekindled the long-standing debate on whether a weaker currency meaningfully boosts India’s export competitiveness. A new report by Systematix Research suggests that the benefits of rupee depreciation are uneven across sectors and, in several cases, may actually worsen the trade balance rather than improve it.
According to the report, sectors such as electronics, chemicals, machinery and petroleum products appear to gain on the export front when the rupee weakens. However, these gains are largely offset by their heavy reliance on imported inputs. With raw material import intensity in manufacturing estimated at around one-third, a weaker rupee raises input costs, inflates the import bill and erodes the net competitiveness of exports.
“Currency depreciation is positive for exports of electronics, chemicals, machinery and petroleum products. But high dependency on imports leads to an increase in import cost, thereby offsetting gains and widening the trade deficit,” the report said.
In contrast, food and agro-based exports emerge as the only segment that consistently benefits from rupee depreciation. Owing to their low import intensity, currency weakness directly translates into higher exports and a tangible improvement in the trade balance. “Food and agro-based exports are the only sector where the currency depreciation is correlated with both an increase in exports and an improvement in trade balance,” the study noted.
The findings challenge the common assumption that labour-intensive sectors gain the most from a weaker currency. Systematix Research concludes that rupee depreciation has a negative impact on textiles and leather, driven by rising costs of imported intermediates and subdued global demand. “While for the labour-intensive sectors like textiles and leather, currency depreciation leads to a negative impact on the sector,” the report stated.
More broadly, the study cautioned that any potential export gains from rupee depreciation can be neutralised by adverse global conditions. Slowing global growth, rising protectionism and higher import costs together overwhelm currency-led competitiveness benefits.
As a result, sectors such as textiles, gems and jewellery, and leather are among the worst affected. “Sectors like Textile, Gems & Jewellery and Leather & related are decisively adversely impacted by currency depreciation,” the report said.
Overall, Systematix Research argues that rupee depreciation is not a dependable policy tool for improving India’s trade balance. With high import dependence and an increasingly protectionist global environment, the benefits of a weaker currency remain limited and, in many cases, counterproductive.
