The sharp depreciation of the Indian rupee in 2026 has created mixed outcomes for India’s food and agriculture sector. This weak rupee can help our food exporters for the time being if these exporters are not importing anything to re-export. Those who are importing to serve the domestic market are now at a disadvantage. Rajat K Baisya explores how the weak Indian rupee and higher import costs are reshaping India’s food processing exports and imports.
The Indian rupee has been making fresh record lows in 2026; by mid-July, USD/INR was around 96.3, and the rupee was down about 12.2% over the previous 12 months, with the RBI still intervening intermittently to smooth volatility rather than reverse the broader trend. India’s merchandise trade deficit remained wide, with the June 2026 trade deficit at $30.43 billion, while the FY26 overall trade deficit widened to $119.3 billion as imports rose faster than exports. India’s FY26 total exports were about $860.1 billion and imports nearly $979.4 billion, showing that the import bill continued to outpace export earnings by a wide margin.
RBI is trying to face the situation by selling dollars, but that may not provide stability to our economy when the Indian import bill is much higher than our exports, and every month, the balance of trade is increasing. Selling dollars in the market can also lead to a cash shortage, triggering other problems like escalating the borrowing costs.
However, this weak rupee can help our exporters for the time being if these exporters are not importing anything to re-export. Those who are importing to serve the domestic market are now at a disadvantage. And in that list, there are many categories of products. Let us examine some of these industries in the following sections.
As mentioned earlier, those who are in international trade will have an advantage. Agricultural commodities, such as groceries, tea, and spices, that have a significant export market will benefit from this short-term weak local currency. In that list products like marine products, organic foods and other traditional ethnic foods like the pickle, papad, Indian snacks like bhujia etc. will also benefit provided they are able to hold on the price at the same level as before the depreciation has hit the market.
The importers are also very clever. And they can adjust the price again taking the current exchange rate into consideration. I have seen in marine products trade that the agents of the importers from Japan and US will everyday adjust the price to be offered based on the everyday price of the local catch. Agents are holding a master Letter of Credit which is utilised to place an official confirm order on the processors adjusting the price which deprives the local processors to exploit the opportunity of a lower price when there is large catchment at the port city.
For many processors of other commodities, this might happen. I have been talking to a Hyderabad-based exporter of organic spices, and they are the dedicated supplier to Middle East-based organised large retailers, and I was told that they are required to renegotiate the prices, and when I enquired why, I was told that the reason is new exchange rate fluctuation. The traders around the world have a similar mentality, they would like to make short-term gain taking this kind of opportunity. Our exporters do not have the strength to bargain hard, and they will willingly pass on the benefit instead of pocketing it. Hence, although there is an opportunity it is doubtful how many will be able to convert that opportunity to their advantage. There will not be many.
Now, let us take the second group, who are importing to sell in the domestic market. Their numbers will also be many. Alcoholic beverages including liquor and beer as well as health foods, high protein foods, specialty foods, dairy products etc. are imported into India and they have a very large market. Only a few years ago, we did not see so many brands of beer, including craft beer, in the market, but now, you name it, and they will be there. These products are now going to be costly.
The customers for these imported products will be from the high-income group bracket and hence even if these are costing higher, people will still buy it. But the impact of the price increase will be felt in the form of lower demand. The basic increase in the price of the imported stuff will also have a cascading effect in the sense that all other costs, including customs duties and trade margins, will be increased proportionately, and everything cannot be passed on to the consumers by raising the prices. This sector also thus going to be impacted by falling rupee against the dollar.
India has also raised duties on selected US-origin products in earlier trade disputes, and the result is that imported apples, almonds and walnuts have become more expensive for Indian consumers. For example, the 2023 framework kept the MFN duty at 50% on apples, 100% or Rs 100/kg on almonds depending on form, and 100% on walnuts, while apple imports also face a minimum import price rule. In past retaliatory actions, US apples were pushed to a 75% total duty, almonds saw higher specific duties, and walnuts faced sharply higher tariff burdens.
Because India imports meaningful volumes of these items, higher tariffs combined with rupee depreciation increase landed prices, may reduce consumption, and can squeeze importer margins unless foreign suppliers absorb part of the shock. While India continues to export more agricultural goods to the US than it imports, the trade gap may narrow as import costs rise and demand adjusts.
There are numerous processors in India who are actually thriving by exporting semi-processed food to international buyers. Some of those are even only seasonal players like mango pulp producers. What will happen to them? Because the processors abroad will be dependent on them for their pulp, juices, and puree, etc. their market will not vanish but the price recovery will get adjusted leading to lower profit.
Then there are many companies that deal with food ingredients and some of them are only importing and selling here in the domestic market. Some of them are importing in bulk and repacking and then selling in the domestic market. Those who are producing it here are also dependent on some imports of key ingredients. They all will also have a disadvantage.
The government has signed the FTA (Free Trade Agreement) with many friendly countries in Southeast Asia, such as Vietnam, Cambodia, etc. Their local currency has not depreciated that much and they, therefore, will have an advantage over the local producers in India to compete. Our local traders will, therefore, be in a disadvantageous position here also.
Project cost which will be dependent on imported machinery, packaging material for a certain category of processed foods which are imported will also increase. In the ultimate analysis, there is going to be a more negative impact on the industry because of the depreciation of the rupee. The government is not showing any concern or anxiety abut that saying that it is due to global factors. But no one can wish it away under any circumstances, and if it continues escalated costs will slow down the growth.
In real terms, our food and agriculture industry is unlikely to benefit from our currency weakening. However, there could be a possibility of short-term gain in some sectors if they have bargaining power. But here also when the rupee becomes strong again in future, the importer might insist on holding on to the earlier price. Either way, our processors stand to lose more than gain.
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