AHMEDABAD: Gujarat’s export-heavy industries, long seen as engines of India’s foreign trade in several manufacturing sectors, are facing renewed headwinds as the US dollar weakens rapidly against the Indian rupee. As the US dollar fell from 87.50 to below 84.50 in under three months, the currency rate fluctuation alarmed exporters, who were already jittery over lingering concerns of tariff hikes from the United States and cooling global demand.The weaker dollar eroded price competitiveness, forcing exporters to either slash margins or risk losing orders in critical markets. While the volatility in global shipping and demand cycles has been a factor since the pandemic era, the latest depreciation of the US dollar sharply intensified pressure on bottom lines. Industry insiders warn that if this trend continues, Gujarat’s edge in traditional export markets could be seriously compromised.Though Gujarat’s exporters have diversified markets—extending to Europe, Africa, and Southeast Asia—the US remains a cornerstone for sectors like textiles, chemicals, and auto components. With the looming spectre of reciprocal US tariffs still unresolved, businesses are now caught in a two-front battle: policy uncertainty abroad and financial strain at home.Exports keep morbi afloat but margin pressures persistOne of Asia’s largest ceramic manufacturing clusters, Morbi is grappling with a challenging phase marked by weak domestic demand and tightening export margins. While the town rode a strong post-pandemic wave, recent volatility in freight costs and a depreciating US dollar started to erode export revenues.“Domestic demand was tepid for the last three years, and manufacturers are feeling the strain,” said KG Kundariya, Past President of the Morbi Ceramics Association. “With demand so low, capacity utilisation dropped to 60–65% across most units, particularly affecting mid-sized and smaller manufacturers. Right now, the industry is leaning heavily on exports.”Morbi’s installed tile manufacturing capacity stands at 2,500 million square metres annually, but new capacity additions have stalled due to weak market sentiment. Industry insiders caution that any further disruption in exports—Morbi’s current lifeline—could sharply dent revenues and margins.Despite global tariff uncertainties, exporters remain cautiously optimistic. “India continues to be seen as a reliable, high-quality supplier. We’re not losing orders due to quality—we’re losing them to countries like Turkey, Spain, and Malaysia because of rupee strength and rising costs,” said Kundariya. “If tariffs were brought to parity globally, Indian tiles would be well-positioned to compete purely on quality.”Weak dollar erodes India’s chemical export edge over ChinaGujarat, known as the chemical hub of India, accounts for 46% of the country’s chemical exports, according to CHEMEXCIL. In 2024–25, the state exported chemicals worth $12,885 million, contributing 46.16% to the national total. However, the chemical industry faced a turbulent period over the past two years, marked by fluctuations in global export demand.“China has a well-established chemicals industry with the capacity to manufacture at highly competitive prices, making it our primary rival in global markets,” said a senior industry representative. “When the dollar was stronger—reaching 87—we enjoyed better competitiveness and higher export realisations. But with the recent weakening of the dollar, our export margins have taken a hit. Exporters are now finding it harder to compete with China globally.”Despite this, there is some optimism regarding the US market. “China is facing significantly higher tariffs in the US, and we believe India has the potential to strike a favourable trade deal that could boost chemical exports to the United States,” the official added.Mihir Patel, Former Vice President of the Gujarat Chamber of Commerce and Industry (GCCI), echoed these concerns. “While higher US tariffs on Chinese goods create opportunities for Indian exporters, China’s massive production scale allows it to offer aggressive pricing in other key markets, including Europe,” he said. “A stronger dollar helped Indian exporters stay competitive outside the US, but now with the dollar weakening, it’s difficult to match China’s pricing.”Patel urged govt intervention: “To sustain our global market share amid a weak dollar, the govt must enhance export incentives to help Indian exporters remain competitive.”Textiles: From competitive to costlyGujarat’s textile sector, especially in home textiles and garments, is seeing a sharp contraction in its export margins. Traditionally, a weaker rupee boosted earnings by enhancing price attractiveness in global markets like the US and EU, giving exporters a competitive edge over counterparts like Bangladesh, Pakistan, and Vietnam who enjoy long-term free trade agreements with key global markets. However, with the rupee appreciating by over 3% in less than a quarter, exporters are finding their profit cushions evaporating.Rahul Shah, Co-Chairman of the Textile Committee at the Gujarat Chamber of Commerce and Industry (GCCI), said the cost impact is being absorbed across the board. “No price increases have been passed on to customers. Manufacturers, exporters, and fabric suppliers are all taking a hit after the US imposed a 10% duty as a reciprocal tariff, which made existing US-bound orders significantly more expensive. The industry was already under pressure due to thin margins—this just adds to the strain. The situation is affecting both direct exports and shipments routed through other countries,” he explained.“Costs are rising at every level of the value chain. This is bound to impact order volumes are down, and US buyers have largely put new purchases on hold. India will only benefit once a bilateral trade agreement with the US is signed. Until then, the uncertainty is stalling business. The dollar depreciation has put margins under further pressure at a time when revenue streams have dried up,” Shah said.According to industry players, the broader demand environment wasn’t strong to begin with. With ongoing geopolitical conflicts and economic uncertainty across Russia and Europe, consumer spending has taken a hit. For smaller exporters and powerloom units, the situation is becoming untenable. Many are scaling down operations or reducing labour hours.Engineering sector sees stable demand despite currency headwindsUnlike other export-oriented sectors, Gujarat’s engineering industry appears relatively insulated from the pressure of a strengthening rupee. Industry players point to a healthy demand environment and long delivery cycles that help cushion the impact of short-term currency fluctuations.“Gujarat remains one of India’s key engineering hubs, and demand continues to grow steadily across segments,” said Sachin Patel, Former Secretary of the Gujarat Chamber of Commerce and Industry (GCCI). “When the rupee was at 87, companies saw strong profits on fulfilled orders. Even at current levels around 84, margins remain positive.”Patel added that sectors such as chemicals, plastics, and oil and gas are driving consistent demand. “Except for the foundry segment, most areas within the engineering sector are witnessing robust order flows,” he said.IT Companies Fear Lower ProfitsThe Information Technology sector, traditionally a major beneficiary of a weak rupee due to its export-driven model, is also feeling the heat from the recent currency appreciation. Tejinder Oberoi, Former Chairman of the GESIA IT Association, said, “IT products and services companies always benefit when the rupee weakens. Profitability improved significantly when the rupee hovered around the 87 mark. However, for orders that were finalised at that level, payments are now being realised at the 84 level—this will undoubtedly dent profits. That said, the industry is accustomed to such currency fluctuations.”Sources within the sector indicate that European and US-based clients are actively cutting costs. In such scenarios, a weaker rupee had previously enabled Indian IT firms to offer aggressive pricing. With the rupee strengthening, maintaining that pricing advantage will become increasingly difficult, potentially impacting new deal flow and profit margins.**Photo Quotes:**“When the rupee touched 87, profits surged. But with current contracts settling at 84, margins have shrunk sharply. We’ve lost pricing flexibility in overseas bids, especially in Europe and North America.” Tejinder Oberoi, Former Chairman, GESIA IT Association.“The currency shift has wiped out our export cushion. With US tariffs already biting, a stronger rupee has made Indian textiles less attractive globally, especially against FTA-backed rivals.” Rahul Shah, Co-Chairman, Textile Committee, GCCI.“The weak dollar has blunted our price advantage over China. Without timely govt incentives, Gujarat’s chemical exporters risk losing market share in Europe and Asia despite quality and reliability.” Mihir Patel, Former Vice President, GCCI.“Exports are our only cushion right now. With domestic demand stagnant and a stronger rupee hurting competitiveness, even well-established units are struggling to maintain margins and retain international buyers.” KG Kundariya, Past President, Morbi Ceramics Association.