A weak rupee may jack up key import bills

IF THE RUPEE's average exchange value stays around the current level for over a year, India's aggregate import bill could rise by $15 billion, ceteris paribus.

- Arunima Bhardwaj, Jatin Grover & Sandip Das

However, in the near term, low oil prices will largely offset the rupee impact on the cost of energy imports.

A weak currency will inflate the import prices of two key agricultural commodities - edible oil and pulses. A spike in the cost of imported fertilisers such as urea and DAP could have adverse fiscal implications.

Analysts said if the depreciation of the local currency continues unabated, it would make electronic items such as smartphones costlier, with higher impact on entry-level products. Currently, smartphones assembled in India have 80-90% of imported content.

However, the most significant effect of the rupee's fall will be on India's $100-billion worth industrial goods imports from China. "Since both the rupee and yuan have weakened against the US dollar, the resultant high cost could further strain trade balance," Ajay Srivastava, founder of Delhi-based trade research firm, GTRI, said.

The rupee ended at 85.26 against the dollar on Wednesday, the third straight session where it plunged to record lows.

"THE COST OF imports of oil & gas will increase with a weakening rupee. However, with the decline in oil prices to $70-75 per barrel now, the impact of weakening rupee would be offset," said Girishkumar Kadam, senior vice-president & group head - corporate ratings, at Icra.

He added that the oil import bill is likely to be lower in FY25 against FY24 in rupee terms.