Should policymakers take comfort from the fact that the impressive growth in exports has been achieved despite geopolitical tensions, tariff uncertainties, and disruptions to international trade? They may, if they choose to ignore or downplay the impact of the declining rupee on the country's shipments.

Exports during the corresponding six-month period of 2025-26 stood at US$ 219.30 billion.

Impact Of Falling Rupee

The rupee’s depreciation matters for exporters as it improves the price competitiveness of Indian goods in overseas markets and increases exporters’ earnings in domestic currency when foreign-currency receipts are converted into rupees.

However, the advantage is not uniform. The benefit varies across industries. Exporters that rely heavily on imported raw materials, components, and energy face higher input costs when the rupee weakens.

The domestic currency has weakened significantly against the US dollar since January 2026, on account of Foreign Institutional Investor (FII) outflows, elevated crude oil prices, and global financial uncertainty.

The rupee fell 2.3% in January to close at ₹91.98 per dollar. The decline intensified in October, with the currency touching ₹96.31 to a dollar on 1 October before recovering to ₹95.05 per dollar on the back of Reserve Bank of India (RBI) initiatives.

Although the rupee strengthened further to ₹94.79 per dollar, the domestic currency has been under pressure for long, raising the import bill and fuelling inflation. On the positive side, it aided exports by increasing realisation in rupee terms.

Electronic Goods

As regards September, the exports rose 23% year-on-year to US$ 44.40 billion, compared with US$ 36.08 billion in September 2025.

The electronic goods sector was the strongest performer, recording a growth of 70.44% to US$ 5.31 billion, up from US$ 3.11 billion in the corresponding month last fiscal. Petroleum products, organic and inorganic chemicals, engineering goods, and cotton yarn and textiles also contributed to the expansion.

The performance of electronics exports is particularly significant as India seeks to expand its manufacturing base, integrate domestic producers into global supply chains, and diversify its export basket.

Non-petroleum merchandise exports rose 15.56% to US$ 218.70 billion during April-September, against US$ 189.26 billion in the corresponding period last year. This indicates that export growth was not driven solely by fluctuations in global oil prices.

Rising Imports And Trade Deficit

The strong export performance has to limit the growing trade imbalance. Merchandise imports rose 16.3% to US$ 437.53 billion during April-September, up from US$ 376.17 billion a year ago.

Consequently, the merchandise trade deficit widened over the six-month period. In September alone, imports increased to US$ 74.61 billion from US$ 69.08 billion a year earlier, leaving a trade deficit of US$ 30.21 billion, compared with US$ 26.86 billion in August.

Rising imports is a reflection of continuing dependence on overseas supplies of energy, industrial inputs, electronics components, and other goods. A weaker rupee can make these imports more expensive, potentially offsetting some of the gains from stronger exports as far as the trade deficit is concerned.

Services exports also contributed to the overall performance. The combined exports of goods and services reached an estimated US$ 476.20 billion in the first half, while total imports rose 15.68% to US$ 551.13 billion. The combined trade deficit consequently remained substantial.

However, services exports grew by a slower 8.69% to US$ 216.31 billion during April-September, while merchandise exports rose 18.51%. Services exports also declined marginally by 0.87% year-on-year in September to US$ 36.35 billion, indicating a moderation in the sector’s contribution to overall export growth.

The Challenge Ahead

The challenge for policymakers is to ensure that the export recovery translates into durable gains in market share. Sustained growth will depend on demand in major overseas markets, competitive production costs, reliable logistics, and access to imported inputs.

The weakening rupee has provided additional breathing space to exporters. The real challenge, however, lies in converting the advantage into sustained productivity gains and enhanced global competitiveness.