Examine the role of currency depreciation in export competitiveness, citing recent Indian trade data.

A depreciating rupee lowers the foreign-currency price of Indian goods and is routinely credited with export surges. India's 26.1% merchandise export growth in August 2026 [1] has revived this debate — but depreciation is a temporary lubricant, not a substitute for competitiveness.

How depreciation supports export competitiveness

• Price channel: exports become cheaper in dollar terms, expanding market share in price-elastic lines such as textiles and gems and jewellery.
• Margin channel: for dollar-invoiced contracts (petroleum products, chemicals), each dollar earns more rupees, financing discounting and capacity addition.
• Expenditure-switching: costlier imports shift demand toward domestic substitutes, aiding the balance — the overall trade deficit narrowed to $9.4 billion in August 2026 from $11.6 billion a year earlier [1].

Why its role is limited — evidence from recent data

• Value, not volume: the monthly release is a US-dollar value series; quantum and unit-value indices are published separately and later [2]. The Commerce Secretary's claim of volume-led growth [1] was therefore an assertion, not a verified finding, on the day it was made.
• Import content offsets the gain: depreciation raises the cost of imported crude, intermediates and capital goods. In August 2026, imports still added roughly $8.7 billion against exports' $9.1 billion [1].
• One-off factors dominate: gold imports fell from $5.4 billion to $2.3 billion, a swing larger than the entire narrowing of the deficit [1].
• Policy, not currency: the February 2026 India–US deal cut tariffs from 50% to 18% on $30.94 billion of exports and to zero on a further $10.03 billion [3] — a more plausible driver.
• Trend check: FY 2025-26 exports grew just 4.22% [4], while the external buffer remains the services surplus (net receipts $60.4 billion, Q4 2025-26) and remittances [5].

Depreciation thus improves competitiveness only at the margin and only briefly, since it also imports inflation and raises input costs. Durable gains must come from productivity — deepening PLI and Foreign Trade Policy 2023 incentives, cutting import intensity in engineering goods, and diversifying destinations — so that a good month becomes a structural shift rather than a currency artefact.