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Good Morning. Indian policymakers are of the opinion that they're not really losing sleep over a depreciating rupee that breached the 90 mark against the dollar on Wednesday. Some stocks rallied, too. But a weak currency in a strong economy is a contradiction, and contradictions always mean deeper problems at play. Will the rupee soon serve a wake-up call?

India’s equity benchmarks fell for the fourth straight session on Wednesday. The BSE Sensex closed at 85,106.81, falling 31.46 points or 0.04%. The NSE Nifty50 closed at 25,986, declining 46.20 points or 0.18%. 

In other news, India’s largest airline, IndiGo, faces a massive operational crisis. Meanwhile, the government backs down over Sanchaar Saathi app after intense backlash.

Policymakers Aren't Losing Sleep Yet, But Rupee May Force A Wake-Up Call

By Govindraj Ethiraj

Consider the arithmetic of the textile trade. When the rupee was at 80 to the dollar, a $2 T-shirt yielded Rs 160. With the currency depreciating to Rs 90, that same exporter can competitively price their product at $1.75 to hold market share or, alternatively, maintain the price point to earn Rs 20 more.

In the real world, that may not happen as input costs might fluctuate.

But not that much. 

A depreciating rupee will act as a shock absorber to Indian exports to high-tariff countries like the United States, particularly against other exporting countries that face lower tariffs. 

It is no surprise, then, that export-heavy IT and pharmaceutical stocks rallied on Wednesday as the currency breached the psychological 90 mark.

RBI’s New Strategy?

This movement signals a distinct strategic pivot in New Delhi’s currency management. 

Under the previous Governor at India’s central bank, Reserve Bank of India (RBI), the mandate was stability at all costs — a tightly managed float that earned the rupee a reputation for resilience but drew attention from the International Monetary Fund for excessive intervention.

That era appears to be over. 

With no resolution to geopolitical trade barriers in sight, the RBI is evidently allowing market forces to take the wheel. 

"It will come back next year," India’s Chief Economic Advisor V Anantha Nageswaran remarked on Wednesday. "Right now, it's not hurting our exports or inflation. I am not losing my sleep over it. If it has to depreciate, now probably is the right time."

Weak Rupee, Weaker Nerves

While some observers attribute the slide to speculators, blaming speculators is a tricky stance to take in free markets, particularly since it works in both directions.

In this case, the market is betting against an imminent US-India bilateral trade deal. 

Despite a US trade delegation visiting next week, a breakthrough seems unlikely, overshadowed by the presence of Russian President Vladimir Putin in New Delhi.

The Kremlin has explicitly stated that Russian oil exports to India will resume soon. This is a bone of contention with Washington. 

Half of the 50% tariff imposed on Indian exports is a punitive measure specifically targeting India’s purchase of Russian crude, which the US views as funding the war in Ukraine. Although Indian refiners had paused direct purchases, reports suggest Russian oil continues to flow via mid-sea transfers.

While exporters may cheer a weaker currency, the rupee at 90 is a hard sell domestically. It raises the cost of overseas education, travel, and outward investment. 

Crucially, it increases the import bill for the world's third-largest oil consumer. Though, with crude prices hovering near $63 a barrel, the inflationary impact remains muted for now.

The real story, however, is not about the price of oil, but the price of confidence.

Rupee Truth Test

There is a disconnect in the current data.

India boasts strong macroeconomic fundamentals such as low inflation, moderate interest rates, and an impressive 8.2% GDP growth rate in the latest quarter driven by robust domestic consumption. 

However, the rupee’s weakness exposes the vulnerability on the external front: a slowdown in Foreign Direct Investment (FDI) and portfolio flows. Even dollar-spending tourists, despite their growing wanderlust globally, aren’t coming to India in meaningful numbers, leaving inbound arrivals only near pre-pandemic levels rather than truly recovering.

It begs the question: which metric truly gauges the health of the Indian economy? Is it the BSE Sensex and NSE Nifty hitting all-time highs, or the currency sliding to historic lows?

While the domestic story is strong, honest self-reflection suggests the rupee is the more accurate barometer of India’s global standing. 

The depreciation reflects diminished interest from global fund managers, who may also be currently distracted by the AI-fueled equity frenzy in Western markets.

Whether this lack of inflow is a matter of faulty perception or fundamental reality is irrelevant; the market pricing is unambiguous. 

Policymakers may not be losing sleep over the rupee today, but if the trend reflects a deeper structural disengagement by global investors, they may soon have to.

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59.8

That’s the level India’s Services Purchasing Managers’ Index (PMI) rose to in November, from 58.9 in October, driven by strong domestic demand. The sector regained momentum, with activity expanding faster after a mild October dip, the HSBC India Services PMI by S&P Global showed. However, international sales grew at an eight-month low amid intense global competition. Input cost inflation eased to a multi-year low, keeping output prices steady and job creation modest.

The Lead: New orders rose faster than usual, though export demand softened due to cheaper alternatives abroad. Operating expenses increased mildly, but overall cost rises were the slowest since August 2020, leaving firms with comfortable capacity and subdued hiring.

Setting: The Composite PMI slipped to 59.7 as manufacturing softened, with the Manufacturing PMI falling to 56.6. Despite competitive and election-related pressures, companies remain optimistic.

IndiGo Ops Gone Awry

IndiGo, India’s largest airline, is facing a major pilot shortage, because of which it has had to cancel several flights over the past couple of days. Reuters said that 150 flights were cancelled on Wednesday, and Business Standard reported that 300 flights were cancelled in the last two days. While the airline cited tech glitches, airport congestion, and “operational requirements,” sources told Reuters that it was due to crew shortages linked to new pilot duty limits.

Flashpoint: From November 1, DGCA extended pilot duty limits, increasing Flight Duty Time Limitation (FDTL) to 14 hours and Flight Duty Period (FDP) to 10.5 hours. Pilot groups warn that the change threatens safety and seek withdrawal.

Outcome: The airline recorded just 35% on-time performance on Tuesday — far below its usual 80%. Overall, about 700 flights were delayed across Delhi, Mumbai and Bengaluru. IndiGo shares fell 2% after the update. Reuters also reported that the carrier said it is working to stabilise operations amid continued delays at key airports.

App Order Axed

The Indian government has backed down from its directive to force-preinstall the Sanchar Saathi cybersecurity app on every new and existing smartphone after intense backlash. 

Turning Point: The mandate drew sharp criticism from the Indian National Congress, whose members called it a “breach of privacy” and demanded parliamentary scrutiny over possible surveillance risks. Apple and Samsung reportedly indicated they would not comply, escalating pressure on the Centre.

Origin: Sanchar Saathi, introduced in 2023, helps users track stolen devices and block fraud through their IMEI number. Yet critics warned that the app’s sweeping permissions could pave the way for mass surveillance. The rollback marks a rare policy reversal for the administration and underscores the growing tension between state-driven cybersecurity initiatives and citizens’ digital-privacy rights.

GDP Overstated, HSBC Warns

India’s macro data may look great on paper with inflation at sub-1%, record trade deficits, and GDP growth above 8%. However, in a recent note, HSBC warned that these numbers may be running ahead of the real picture, and that India's September GDP numbers may be exaggerated.

The Context: "On the statistical front, a low base and deflator issues may have exaggerated the numbers. We estimate that two deflator issues affecting manufacturing and services sectors, respectively, may have understated the deflator by 1.2ppt and overstated real GDP growth," the note read. It pegged on-ground momentum is closer to 7%.

What Now? HSBC said that the RBI will likely cut rates in the December meeting. With GST cuts fading, fiscal spending tightening, and exports softening under steep tariffs, HSBC expects the gap between “official” and “actual” growth to persist through FY26. A February GDP revision could pull numbers lower. For now, the economy looks good on paper, but HSBC says the math behind the momentum needs a harder look.

Memory Meltdown Begins

A global shortage of memory chips is disrupting tech supply chains, driving prices higher and forcing companies to compete for limited stock. According to Reuters, AI giants like Microsoft, Google and ByteDance are racing to secure supplies from Samsung, Micron and SK Hynix, while Japanese retailers ration hard drives and Chinese smartphone makers warn of price hikes.

Why It Matters: Demand spans everything from basic flash storage to advanced high-bandwidth memory used in AI data centres, with some prices doubling since February.

What's Next? Analysts warn the shortage could delay digital infrastructure, fuel inflation and slow AI progress, as manufacturers struggle to balance high-end chip production with traditional memory needs.

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