Rupee depreciation offers limited export benefit, hurts labour-intensive sectors

The recent depreciation of the Indian rupee has reignited debate on whether a weaker currency genuinely enhances India’s export competitiveness.

- TBG NETWORK

A new report by Systematix Research says that currency depreciation delivers uneven outcomes across sectors and, in many cases, worsens the trade balance rather than improving it According to the report, sectors such as electronics, chemicals, machinery and petroleum products do see an apparent export benefit from a weaker rupee. However, this advantage is significantly diluted due to their heavy dependence on imported inputs. The study noted, “Currency depreciation is positive for exports of electronics, chemicals, machinery and petroleum products. But high dependency on imports leads to increase in import cost, thereby offsetting gains and widening the trade deficit.” With raw material import intensity in manufacturing at around one-third, higher input costs erode export competitiveness and inflate the overall import bill.