India’s import bills are set to rise due to the continuing depreciation of the Indian rupee. On Wednesday, the rupee closed at 85.26 to the dollar, marking the third consecutive session of record lows. If this trend continues, experts predict a $15 billion increase in India’s aggregate import bill over the next year. While lower oil prices will offer some relief, key imports like fertilizers, edible oils, pulses, and electronic goods will see substantial cost hikes.
Fertilizer Imports Could Be Hit Hardest
One of the most significant impacts will be on India’s fertilizer imports, particularly DAP (Diammonium Phosphate) and Potash, both of which are largely imported. Fertilizer costs have already been under pressure, and further depreciation of the rupee could worsen the situation, exacerbating fiscal challenges for the government. The Red Sea crisis, which has disrupted shipping routes, also adds to the challenge, with deliveries taking an extra 14–45 days to reach Indian ports due to rerouting through South Africa.
India’s dependence on imports for potash, which is crucial for horticultural crops, and DAP, used widely in agriculture, is substantial. About two-thirds of India’s annual 11 MT DAP consumption is sourced from countries like Russia, Morocco, Saudi Arabia, and China. Experts warn that rising costs could strain India’s agricultural sector further, especially as the fertilizer subsidy for FY24 has been revised to Rs 1.88 trillion.
Impact on Edible Oils and Pulses
India imports about 58% of its edible oil requirements, primarily from Malaysia, Indonesia, and Ukraine, among others. A weaker rupee could drive up the cost of these oils, especially as global oilseed production remains volatile. However, while pulses imports surged to a record $3.75 billion in FY24, the rupee’s decline may not significantly increase their cost due to a robust domestic crop.
Electronics and Industrial Goods to Become Costlier
A weak rupee will also impact the price of electronics, particularly smartphones, many of which are assembled in India but have a significant import component (80–90%). Analysts suggest that smartphones in the sub-Rs 10,000 category will see price increases of up to 2% for every 5% depreciation in the rupee. While higher-end smartphones might absorb some of these costs, the entry-level market will feel a stronger pinch.
Additionally, India’s $100 billion industrial goods imports from China could become more expensive as both the rupee and the yuan weaken against the dollar. This could further strain India’s trade balance, as China remains a major supplier of industrial machinery and components.
Oil Import Bills and Energy Costs
While the rupee’s depreciation impacts oil and gas imports, the decline in global oil prices to around $70-75 per barrel has offset some of the currency effects. Analysts predict that India’s net oil and gas import bill will be lower in FY25 compared to FY24, despite the weak rupee. The country’s net oil and gas import bill for the April-November period of FY25 was $89 billion, up from $79.6 billion during the same period last fiscal year.
Despite the weaker rupee, oil-exporting countries are unlikely to adjust prices significantly since most trade is conducted in US dollars.
Energy and Coal Imports Impact
India is also a major importer of coal, necessary for its thermal power plants. A weaker rupee is likely to have a limited impact on electricity generation costs, as coal imports account for only 7–7.5% of overall consumption by the power sector. The cost of coal-based generation may vary marginally by about 0.3 paise per unit of power sold across the country.
Increased Costs, Lower Margins for Indian Consumers
The continued depreciation of the rupee will likely increase the cost of living for Indian consumers, particularly in the electronics and agricultural sectors. For the average consumer, rising prices for everyday goods like edible oil, pulses, and smartphones will add to inflationary pressures. With India still heavily reliant on imports for many essential commodities, the weakening rupee presents a growing challenge for the country’s trade balance, as well as fiscal and economic stability.
As the rupee continues its downward trajectory, both businesses and consumers are bracing for the higher costs of key imports, and the impact is likely to ripple through various sectors, from agriculture to electronics.
