Dollar Gains, Rupee Falls: What Startups Must Know to Stay Ahead

The Indian rupee breached the 91-mark against the US dollar on Tuesday for the first time in intra-day trade, closing in at 91.14, down 36 paise from its previous close. The local currency opened at 90.87 in interbank trade and slid steadily through the session. This follows Monday’s record close of 90.78, marking a cumulative loss of nearly 1% over the past five sessions. Analysts attribute the depreciation to sustained foreign fund outflows, global risk aversion, and uncertainty surrounding the India-US trade negotiations.

For India’s startups and micro, small, and medium enterprises (MSMEs), this is more than just a number, it is a direct threat to cost structures, cash flows, and growth plans.

What the Currency Slide Means for Businesses?

A weaker rupee directly affects import-dependent startups and MSMEs. For example:

• Electronics startups importing chips and components from the US or Taiwan will face higher costs, as every $1 spent now costs more in rupees.

• Pharmaceutical MSMEs importing active ingredients may see production costs spike, squeezing already thin margins.

• Tech startups using cloud services billed in dollars, like AWS or Microsoft Azure, will experience higher monthly bills.

For early-stage startups, which often operate with limited cash reserves, these sudden costs can disrupt cash flow, delay product launches, and affect hiring plans. MSMEs, which often cannot pass on costs to customers, may be forced to absorb the increase, affecting profitability.

However, there is a silver lining. Export-oriented startups can benefit. For instance:

• IT service providers billing foreign clients in dollars will earn more in rupee terms.

• Textile exporters shipping garments to Europe or the US can gain a pricing advantage in global markets.

Experts caution that these benefits are conditional. If global demand slows or production relies heavily on imported inputs, the gains may be offset.

Why the Rupee is Falling?

Several factors have intensified the pressure on the rupee:

1. Foreign Institutional Investors (FIIs) selling Indian assets: Since July 2025, FIIs have offloaded over ₹1.55 lakh crore, concerned about US trade tariffs and global economic uncertainty.

2. Importers hedging in dollars: Oil, gold, and other import-dependent companies are buying dollars to mitigate tariff risks, increasing demand for the greenback.

3. Global risk aversion: Investors often move capital to “safer” currencies like the US dollar during uncertain times.

How Startups and MSMEs Can Navigate the Crisis?

1. Hedging strategies: Forward contracts, options, or dollar deposits can protect against sudden currency swings. While large corporations have access, startups and MSMEs can explore banking solutions and fintech platforms offering simplified forex hedging.

2. Diversifying suppliers: Reducing dependence on imports from a single country can mitigate costs during currency volatility.

3. Export focus: Startups can explore international clients or marketplaces, leveraging the weaker rupee to gain a competitive edge.

4. Government support: Industry bodies are calling for policy interventions, easier credit access, and guidance to manage forex risks.

Future Outlook

• Short-term: Import-reliant startups may face margin pressure; exports could see modest gains.

• Medium-term: Policy support, access to hedging tools, and strategic planning will be key for survival.

• Long-term: Currency volatility reinforces the need for financial literacy, strategic sourcing, and global business awareness among Indian entrepreneurs.

Despite the challenges, startups and MSMEs remain vital engines of employment, innovation, and economic growth in India. The rupee’s slide is not just a crisis, it is an opportunity to build resilience and rethink strategies for a globalized world.