Synopsis: As the rupee hits a record ₹89 per dollar, several sectors are becoming more expensive. This article tells you how the rupee decline affects inflation, the sectors most impacted by changes in import levels, analyses the challenges faced by everyday consumers, and provides an overall economic outlook.
The Indian rupee plummeted to a historical low of ₹89.65 on November 21, 2025, which indicated a turning point for the Indian economy with massive impacts on inflation, imports, and consumer finances. It shows a year-to-date drop of more than 5-6% it will be one of the underperforming currencies in Asia in 2025.
Drivers Behind the ₹89 Rupee
Certain factors took their due part in pushing the rupee above this psychological benchmark
- India’s trade deficit hit a new high of $41.68 billion in October 2025, increasing from $26.23 billion in the same month of the previous year, as imports soared 16.6% to a new high of $76.06 billion, mainly due to gold imports which increased by 199%.
- The decline in exports was at 11.8%, and the US was one of the major markets affected, its imports going down from $6.9 billion to $6.3 billion as a result of high tariffs.
- The US Federal Reserve’s hawkish stance on delaying rate cuts strengthened the dollar index above 100.
- While foreign institutional investors withdrew $16.5 billion from Indian equities year-to-date.
Inflation Pressures and RBI’s Policy Dilemma
The rupee’s weakness has significant implications for inflation, though the impact is nuanced by India’s current deflationary food prices. According to RBI estimates, a 5% depreciation in the rupee leads to a 30-35 basis point increase in inflation. For India, which imports 85-89% of its crude oil requirements, the rupee at ₹89 means every dollar of oil now costs ₹8,900 compared to ₹8,000 at the 80 rupee level, an 11% increase in domestic oil imports bills that flows directly into transportation and manufacturing costs.
However, India’s retail CPI inflation has surprisingly remained low, dropping to a 99-month low to 1.54% in September 2025 and further to an estimated 0.25% in October 2025, well below the RBI’s 2-6% target range. The main factor behind this surge is food deflation along with good base effects. This scenario puts the RBI in a tough spot regarding policy.
Depreciation of the rupee would generally result in a situation where the central bank has to either maintain or raise rates to protect the currency, while the extremely low inflation gives room for a decrease in rates in order to boost growth. The RBI has reduced rates by 100 bps since February 2025 already, which has dropped the repo rate to 5.50%. A 25 bps cut in December 2025 is anticipated by most experts; however, the rupee’s weakness may limit the RBI’s easing cycle.
Also read: 7 High-Potential Export Sectors in India Set to Benefit from Rising Global Demand
Effects on Import and Sectors affected
- Crude Oil and Energy: Every rupee depreciation has added about ₹10,000 crore to India’s annual crude import bill. The rupee’s depreciation makes crude oil imports expensive even though the global oil price is not high as Brent crude is at about $62-63 per barrel.
- Aviation Sector: The airlines are in a tight spot as the dollar-denominated fuel, aircraft leasing, and maintenance costs (30-40% of operating expenses) keep on increasing. Aviation turbine fuel(ATF) prices in Mumbai have gone up to around ₹88,445 per kilo litre and the same in Chennai up to ₹98,090 as the rates are being hiked quite often. Aviation expert Harsh Vardhan noted that India’s airlines face the highest fuel cost globally, and the weak rupee exacerbates this burden by approximately 40% potentially leading to industry losses in FY2025-26.
- Electronics and Consumer Durables: The consumer electronics sector sources 50-60% of components from overseas, including semiconductor, displays and processors. The higher retail prices for smartphones, laptop, LED bulbs, and kitchen appliances.
- Pharmaceuticals: The production of medicines in the pharmaceutical sector is majorly based on importing active pharmaceutical ingredients (APIs). The depreciated rupee increases the cost of these imports and reduces the profit margins for the companies that will have to pass on the cost to the consumers resulting in higher prices for essential drugs, however, the companies will enjoy the advantage of export competitiveness.
- Impact on Common Consumers Daily Essentials and Cost Push Inflation: Increasing prices of daily necessities will affect everyone even if consumers don’t directly buy imported goods. The reason is that, besides expensive fuel, the cost of inputs has also gone up; consequently, transportation and manufacturing costs have risen. This results in a widespread cost push inflation that impacts almost every aspect of our lives such as vegetables, grains, packaged foods, delivery services, and even travel.
- Foreign Education and Education Loans: The impact on students seeking foreign education is very harsh. The annual tuition fee of $40,000 which was ₹32.8 lakh at ₹82/USD now amounts to ₹35.6 lakh, an increase of ₹2.8 lakh solely due to the exchange rate fluctuation. In the case of education loans that are sanctioned in INR, every rupee of currency depreciation raises the required loan amount and the EMI burden. So, if the rupee goes down by 5% per year while the loan is charged with 7.5% interest, the effective borrowing cost would be around 12.5% per annum.
- International Travel and Remittances: People who travel overseas have become substantially costlier like hotels, tours, and daily expenses requiring more rupees per dollar. If a $5,000 trip which cost ₹3.65 lakhs in the year 2022 now necessitates an additional ₹80,000, i.e., a total of ₹4.45 lakhs.
Economic Outlook
The Rupee depreciation is negatively impacting the tourism sector, but still India reaping the benefits of its strong macroeconomic fundamentals. The foreign exchange reserves of $692.58 billion on November 14, 2025 (covering 11 months of imports) served as a formidable defense, hence the difficulty in the situation was not felt by the country.
The current account deficit is estimated to touch a 20 year low of 0.5% of GDP in FY 2026 India’s GDP growth stays strong at 6.5%-6.8% for FY 2026, powered by domestic consumption, services exports, and government infrastructure spending.
Conclusion
The rupee’s breach of ₹89 represents a significant challenge for India consumers and policymakers alike. While exporters gain marginal advantages, sectors like IT services, pharmaceuticals, textiles, and chemicals gain and macroeconomic buffers remain strong, but common consumers face some problems.
Written by Yatheendra N
