Fashion
Rupee at 95/$: What it means for India’s textile sector
A perfect storm behind the rupee slide
The current depreciation is not cyclical; it is geopolitical and structural.
The Indian rupee’s sharp fall is creating a dual impact, boosting export competitiveness while simultaneously inflating input, energy, and logistics costs.
MMF segments are most exposed, as import dependence erodes margin gains from currency depreciation.
Demand weakness in the US and EU limits the benefit of improved pricing, creating a cost–demand mismatch.
- Oil shock from Middle East conflict: Brent crude surged past $110–115/barrel, sharply increasing India’s import bill
- Foreign capital outflows: Over $19 billion exited Indian equities, pressuring the currency
- Strong US dollar and high interest rates: Capital shifting towards dollar assets
- Trade and geopolitical uncertainty: Weakening investor confidence and export outlook
Together, these forces have pushed the rupee to record lows, with risks of further depreciation if conditions persist.
The Indian rupee’s fall past ₹95 per US dollar marks its steepest annual decline in 14 years, representing a critical moment for the textile and apparel (T&A) industry, reshaping cost structures, export competitiveness, and sourcing strategies simultaneously. While a weaker rupee traditionally boosts exporters by improving rupee realisations on dollar-denominated sales and enhancing India’s price competitiveness against peers like Bangladesh and Vietnam, the current depreciation is occurring alongside a sharp rise in crude oil prices and global uncertainty, creating a far more complex operating environment.
The industry’s heavy dependence on imported inputs, particularly in the man-made fibre (MMF) value chain, including polyester, PTA, MEG, dyes, and specialty chemicals, means that the currency shock is directly translating into higher raw material costs. This is further compounded by rising energy and logistics expenses, as fuel-linked inflation drives up power tariffs, freight rates, and processing costs across spinning, dyeing, and finishing segments. As a result, the initial export margin gains are already being diluted, especially for MMF-based manufacturers and vertically integrated players with significant import exposure.
At the same time, rupee volatility is intensifying working capital pressures across the value chain. Higher input costs are inflating inventory values, while fluctuating exchange rates are making export realisations less predictable and increasing the cost of hedging. For small and mid-sized enterprises, this could tighten liquidity cycles and increase dependence on short-term financing.
On the demand side, the situation remains equally challenging: key export markets such as the US and EU are grappling with inflation, cautious consumer spending, and elevated retail inventories, limiting order visibility despite improved pricing competitiveness from India. This creates a structural paradox where Indian suppliers are more cost-effective globally yet face subdued demand and heightened price resistance from international buyers.
Segment-wise, cotton textiles stand relatively insulated due to lower import dependency, whereas MMF and synthetic segments face the sharpest cost pressures, and garment exporters operate in a narrow margin band between currency gains and demand weakness.
In response, the industry is already undergoing strategic recalibration. Manufacturers are gradually shifting towards cotton and blended products to reduce exposure to volatile petrochemical inputs, while also strengthening foreign exchange risk management through increased hedging. There is a renewed push towards supply chain localisation, particularly for chemicals and trims, alongside efforts to renegotiate pricing with global buyers though with limited success in a demand-constrained environment.
Looking ahead, much will depend on the trajectory of crude oil prices, the potential for further rupee depreciation towards the ₹100/$ mark, and the effectiveness of policy interventions in stabilising currency markets. Ultimately, the rupee’s sharp fall is proving to be a double-edged sword for the T&A sector: offering short-term export advantages, but simultaneously accelerating cost inflation and exposing structural vulnerabilities, thereby forcing companies to prioritise efficiency, agility, and financial discipline in an increasingly volatile global trade landscape.
Fibre2Fashion News Desk (DL)