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Weaker Indian rupee boosts UAE dirham: Food prices may drop by up to 15%
Stronger dirham generally makes imports cheaper, especially from countries whose currencies have weakened against it
Imports from India will become cheaper as the UAE dirham has strengthened against the rupee in recent months, helping to reduce inflation, according to analysts and retailers.
The Indian rupee hit an all-time low of nearly 24 against the UAE dirham last month due to the strengthening of the US dollar. According to xe.com, the South Asian currency has fallen from 22.5 to nearly 24 against Emirati dirham in the past year.
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Dr Dhananjay Datar, chairman of Al Adil Supermarkets, said the Indian rupee has weakened; therefore, food prices will go down. "It is estimated that Indian food and other commodity prices will be cheaper by 15 per cent due to the weakening of the rupee,” he said, adding that Al Adil Group imports more than 10,000 items including food and non-food items from India alone.
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India is one of the UAE’s largest trading partners, with a bilateral projection to reach $100 billion in the coming years. Dr Jay added that freight rates have dropped dramatically between India and the UAE due to the excessive availability of shipping containers.
Drop in inflation
Hani Abuagla, senior market analyst at XTB Mena, said a stronger UAE dirham generally makes imports cheaper, especially from countries whose currencies have weakened against it.
“When the dirham strengthens against the Indian rupee, imports from India become cheaper for UAE businesses, as they can purchase more goods for the same amount of dirham. The dirham’s peg to the US Dollar drives its strength against other currencies, including rupee. Moreover, India’s trade deficit with the UAE, particularly in oil and gold, puts pressure on the Indian rupee, contributing to its depreciation against the Emirati currency. This results in cheaper imports from India and other countries in a similar situation,” said Abuagla.
He added that a stronger dirham can make imports cheaper, which may help limit inflationary pressure, particularly for food and electronics items.
“However, inflation could remain exposed to the dirham’s peg to the US dollar and rising housing costs. The peg restricts the UAE’s ability to manage inflation through independent monetary policy. So, while a stronger dirham could ease inflation to some extent, its overall impact is constrained by global and local economic factors,” he said.
Waheed Abbas
Waheed Abbas is Assistant Editor, covering real estate, aviation and other business stories that directly affect the lives of UAE consumers. He frequently reports human interest stories, too.
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