How a falling rupee is making India pay more

India is facing a double challenge as rising crude oil prices and a falling rupee increase pressure on the economy. The ongoing conflict between the United States and Iran has intensified concerns over global oil supplies, especially through the Strait of Hormuz, a key route for global crude shipments. Fears of supply disruptions have pushed up international oil prices, with Brent crude rising nearly 50% since the conflict escalated and currently hovering around $107 per barrel. India’s crude basket has also become significantly costlier during this period, increasing pressure on the country’s import bill.

Higher crude prices are making imports more expensive, while the weakening rupee is further inflating India’s import costs by making every dollar purchase costlier. This comes at a time when the country’s dependence on imported energy, gold, edible oils and fertilisers has risen sharply over the last five years. With imports touching nearly $776 billion in 2025-26 and the rupee slipping close to 96 against the US dollar, concerns over foreign exchange reserves and the trade balance are growing.

Against this backdrop, Prime Minister Narendra Modi has urged citizens to use fuel and other imported products carefully, avoid unnecessary foreign spending and support the country’s economic stability during a period of global uncertainty.
 
Soaring Import Bill

India’s import bill has almost doubled in the last five years, highlighting the country’s rising dependence on imported energy, gold, edible oils and fertilisers. According to CMIE data, India’s total imports rose from $393 billion in 2020-21 to $775.7 billion in 2025-26, a nearly 97% increase. The sharp increase reflects higher global commodity prices, rising domestic consumption and India’s continued reliance on imported raw materials and essential goods.

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Falling Rupee

The Indian rupee has weakened steadily against the US dollar over the past five years, falling from 74.2 (RBI reference exchange rate for the year) in 2020-21 to 95.56 on May 12, 2026. The sharp depreciation reflects rising global uncertainties, strong dollar demand, higher import dependence and persistent pressure on India’s external trade and capital flows.

Petroleum Imports

Petroleum crude and products continue to dominate India’s import basket. Imports of petroleum products rose from $82.4 billion in 2020-21 to $173.6 billion in 2025-26, registering a 111% increase over five years. The oil import bill had touched a peak of $209.3 billion in 2022-23 after global crude prices surged following the post-pandemic reopening and the Russia-Ukraine conflict. Although oil imports moderated later due to softer prices, they remain significantly above pre-pandemic levels.
India imports nearly 85% of its crude oil requirement, making the economy highly sensitive to global oil prices. Rising fuel demand from transport, industries and households keeps the import bill elevated. Higher crude prices also affect inflation, transport costs and the trade deficit, which is why oil prices remain closely watched by policymakers.

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Gold Imports

India remains one of the world’s largest consumers of gold, driven by jewellery demand, weddings, festivals and investment buying. During periods of uncertainty, many households continue to prefer gold as a safe asset. However, rising gold imports increase pressure on India’s current account balance.

Gold has emerged as another major contributor to India’s import bill. Gold imports more than doubled from $34.3 billion in 2020-21 to $72.4 billion in 2025-26, also recording a 111% rise over five years. After falling to $34.9 billion in 2022-23, imports rebounded sharply, reaching a record high in 2025-26.

India’s gold import volumes have shown a declining trend in recent years. Gold imports fell from a peak of 879 tonnes in 2021-22 to 721 tonnes in 2025-26. However, despite the decline in import volumes, the sharp rise in global gold prices significantly increased India’s overall gold import bill.

Vegetable Oils

Vegetable oils are another key import category. Imports rose from $11.1 billion in 2020-21 to $19.5 billion in 2025-26, reflecting a 76% increase over five years. The import bill had peaked at $20.8 billion in 2022-23. India imports large quantities of palm oil, soybean oil and sunflower oil because domestic production is insufficient to meet demand. 

Fertilisers

Fertiliser imports have shown one of the fastest growth rates among major import categories, increasing from $7.6 billion in 2020-21 to $16.4 billion in 2025-26, a rise of 116%. Fertiliser imports had touched $17.2 billion in 2022-23 as global prices surged. India depends on imports of products such as urea, DAP and potash to support its agricultural sector. Higher global fertiliser prices also increase the government’s subsidy burden.

Foreign Travel and Education

Balance of Payments data also shows that India’s foreign exchange outflow on overseas travel for business and education has risen sharply. Net outflows under business travel increased from $4.1 billion in 2018-19 to $6.7 billion in 2024-25, while education-related outflows rose from $2.8 billion to $6.6 billion during the same period. Education outflows had fallen to $1.9 billion in 2020-21 during the pandemic but rebounded strongly after global travel resumed.

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Foreign Exchange Reserves

On the positive side, India’s foreign exchange reserves have continued to rise steadily over the past several years, increasing from $475.56 billion in 2019-20 to nearly $698.49 billion by April 2026. These reserves have provided an important cushion to the Indian economy against a rising import bill and global economic shocks.

A major highlight is the sharp jump in gold reserves held by the RBI. The value of gold in India’s forex reserves has almost quadrupled from $30.89 billion in 2019-20 to $120.24 billion in April 2026. Gold’s share in total forex reserves has also risen significantly during this period, from 6.5% in FY20 to 17.2% in April 2026.

While overall forex reserves grew by around 47% between 2019-20 and April 2026, gold reserves surged by nearly 290%, reflecting the RBI’s increasing preference for gold as a strategic reserve asset amid global uncertainty, geopolitical tensions and currency volatility.

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The data underlines how India’s rising consumption and economic growth are increasing dependence on imported commodities and foreign spending. A weaker rupee is making everything from crude oil and fertilisers to overseas education and travel more expensive for the country.

With global energy prices remaining volatile, higher imports are widening pressure on India’s trade balance, inflation and foreign exchange reserves. This is why policymakers are increasingly stressing cautious consumption, lower dependence on imports and the need to strengthen domestic production to protect the economy from external shocks.