Rupee at a Record Low: Why India’s Startups and Small Businesses Are Feeling the Heat

On a quiet Monday morning, as markets opened and trading screens flickered to life, the Indian rupee crossed a line it had never crossed before. At ₹90.58 against the US dollar, the currency slipped to an all-time low—an event that may look like just another data point on a forex chart, but one that carries deep and immediate consequences for India’s startup ecosystem and small industries.

For thousands of founders, MSME owners and early-stage entrepreneurs across the country, this fall in the rupee is not an abstract macroeconomic story. It directly touches their balance sheets, their monthly cash flows, and in some cases, their survival plans.

The rupee’s latest slide comes at a time when startups are already navigating a tough operating environment—tight funding, cautious investors, uneven consumer demand, and rising operational costs. The currency weakness has only added another layer of pressure.

What Happened in the Currency Markets

In early trade on Monday, the rupee opened at 90.53 against the US dollar at the interbank foreign exchange market. Within hours, it weakened further to touch 90.58, its lowest intraday level ever. This followed a sharp fall on Friday, when the currency had already declined by 17 paise to close at 90.49.

The decline reflects a mix of global and domestic concerns. Persistent foreign fund outflows from Indian markets, coupled with uncertainty around an India–US trade agreement, have pushed investors into a wait-and-watch mode. Risk appetite has softened, and emerging market currencies, including the rupee, have borne the brunt.

Interestingly, this pressure on the rupee has continued even as the dollar index—measuring the US currency’s strength against six major global currencies—was marginally lower at 98.35. For India, domestic factors and capital flows have outweighed global dollar movements.

Why Startups and MSMEs Are Most Vulnerable

Large corporations often have the financial muscle and risk management tools to deal with currency volatility. Startups and small businesses, however, operate very differently.

For many early-stage startups and MSMEs, especially those in electronics, manufacturing, pharmaceuticals, clean energy and industrial services, imports are unavoidable. Raw materials, machinery, specialised components, and even basic equipment are often sourced from overseas. A weaker rupee instantly makes all of these inputs more expensive.

Margins in these businesses are already thin. When input costs rise suddenly, founders are left with difficult choices—absorb the losses, delay growth plans, cut costs elsewhere, or pass on the higher prices to customers and risk losing competitiveness.

Technology startups are facing a similar squeeze. Cloud services, foreign software licences, developer tools, cybersecurity platforms and overseas vendors are typically billed in dollars. For bootstrapped ventures or small firms without strong pricing power, even a small change in exchange rates can disrupt monthly budgets, slow down hiring, or force founders to postpone expansion plans.

Exporters May Gain—But With Caveats

There is, however, another side to the story.

For export-oriented startups and MSMEs, a weaker rupee can offer some near-term relief. When dollar earnings are converted into rupees, revenues appear higher. Sectors such as IT services, SaaS, textiles, handicrafts, engineering goods and niche manufacturing could see better rupee realisations.

But industry experts caution against celebrating too soon. These gains can quickly disappear if global demand remains weak or if imported inputs form a large part of the cost structure. In many cases, exporters benefit on one side of the ledger while losing on the other.

In addition, global clients are themselves cautious amid geopolitical tensions and slowing growth in key markets. Currency advantage alone may not be enough to drive new orders.

Market Volatility Adds to Funding Worries

The currency weakness has coincided with volatility in domestic equity markets, further denting investor confidence. On Monday, the Sensex was trading 298.86 points lower at 84,968.80, while the Nifty slipped 121.40 points to 25,925.55.

For startups—especially those planning late-stage funding rounds or IPOs—prolonged weakness in public markets can make fundraising tougher and valuations more conservative. Venture capital and private equity investors often take cues from broader market sentiment, and risk aversion tends to flow downhill.

Rising Oil Prices Add Another Layer of Cost

Compounding the challenge is the rise in crude oil prices. Brent crude climbed 0.52 per cent to USD 61.44 per barrel in futures trade. For a country like India, higher oil prices combined with a weaker rupee can quickly translate into increased fuel, logistics and energy costs.

Small manufacturers, logistics startups, delivery platforms and micro enterprises are particularly exposed to these indirect cost pressures. Over time, this can ripple through supply chains, pushing up prices and squeezing profitability.

The Hedging Gap for Small Businesses

One long-standing concern raised by industry bodies is that sharp currency movements disproportionately hurt smaller businesses. Unlike large corporates, most startups and MSMEs do not have access to sophisticated forex hedging instruments or dedicated treasury teams.

Many operate without any formal currency risk management strategy, making them vulnerable to sudden exchange rate shocks. Even when hedging tools are available, they are often complex or expensive for small firms to use effectively.

A Test of Resilience for India’s Startup Economy

As uncertainty continues around global trade dynamics, capital flows and geopolitical developments, startups and small industries are being forced to operate in an increasingly volatile environment. Founders are watching currency screens as closely as they track customer growth or burn rates.

The rupee’s fall to a record low is a reminder that macroeconomic shifts can have very real, very local consequences. For India’s startups and MSMEs—key drivers of employment, innovation and economic growth—the road ahead will demand resilience, careful financial planning, and greater policy support.

As the ecosystem waits for stability, the message from the currency markets is clear: in a globalised economy, even a few paise can make a big difference.