Rupee at 80: Signs of lower FY23 GDP and corporate sector growth

If history is any gauge, the recent depreciation in the value of rupee against the US dollar signals a slowdown in India’s growth cycle. This will translate into lower-than-expected growth in gross domestic product (GDP) and corporate sector growth in 2022-23 (FY23). Historically, there is a negative correlation between the rupee exchange rate, economic growth, and corporate sector growth in the country.

The correlation coefficient between the year-on-year (YoY) change in corporate sector revenue and the rupee exchange rate is minus 0.63 since 2003-04 (FY04). The correlation is higher at minus 0.74 for the period prior to the Covid-19 pandemic.