The recent depreciation of the Indian rupee against the UAE dirham is expected to drive down food prices by as much as 15%, benefiting consumers in the UAE. Analysts and retailers have highlighted that the stronger dirham makes imports more affordable, particularly from India, which is one of the UAE’s largest trading partners.
Rupee Hits Record Low Against UAE Dirham
The Indian rupee recently hit an all-time low of nearly 24 against the UAE dirham due to the strengthening of the US dollar. According to data from xe.com, the rupee has fallen from 22.5 to nearly 24 against the dirham over the past year.
Dr. Dhananjay Datar, chairman of Al Adil Supermarkets, noted that the weaker rupee would lead to significant cost reductions on food imports.
"It is estimated that Indian food and other commodity prices will be cheaper by 15% due to the weakening of the rupee," Dr. Datar said.
Al Adil Group, a major UAE retailer, imports over 10,000 food and non-food products from India, meaning the price reduction will be reflected in supermarkets across the country.
Stronger Dirham Lowers Import Costs
Hani Abuagla, a senior market analyst at XTB Mena, explained how the currency fluctuation benefits UAE businesses.
"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 dirhams. This trend helps limit inflationary pressures, particularly on food and electronics," Abuagla said.
The dirham’s peg to the US dollar plays a crucial role in its strength against other currencies, including the rupee. Additionally, India’s trade deficit with the UAE, particularly in key commodities like oil and gold, puts further pressure on the rupee, contributing to its depreciation.
Impact on Inflation and Market Trends
While a stronger dirham leads to lower import costs, analysts warn that overall inflation in the UAE remains influenced by global and local economic factors.
"Although cheaper imports help limit inflation, the UAE’s inflation rate is still exposed to other pressures such as rising housing costs and the dirham’s peg to the US dollar. The peg restricts the country’s ability to manage inflation through independent monetary policy," Abuagla added.
Freight Rates Also Declining
Another factor contributing to the price drop is the significant reduction in freight costs between India and the UAE. The availability of shipping containers has increased, leading to a dramatic drop in shipping rates, making Indian imports even more cost-effective.
India-UAE Trade Relations Strengthen
India remains one of the UAE’s top trading partners, with bilateral trade projected to reach $100 billion in the coming years. With the UAE dirham gaining strength, retailers expect continued reductions in food prices, benefiting consumers in the region.
Looking Ahead
Experts suggest that if the rupee remains weak, further price reductions could be seen in various imported commodities, from grains and spices to electronics and textiles. However, factors like global oil prices, inflation, and economic policies in both India and the UAE will play a role in determining long-term trends.
For UAE residents, the stronger dirham offers immediate relief in terms of lower grocery bills, making daily essentials more affordable in the months ahead.
