Rupee’s Crawl-Like Movement Helps Importers Hedge Better

Chennai: Despite the depreciation making imports costlier, the ‘crawl-like movement’ of the rupee, as classified by IMF, is helpful for importers who are hedging the currency risk.

The International Monetary Fund (IMF) had recently reclassified India’s exchange rate regime from a “stabilised arrangement” to a “crawl-like arrangement”. It means that the IMF has been observing that the Indian Rupee has been moving slowly, steadily, and within a narrow band, instead of fluctuating freely.

“Under a crawl-like arrangement, a currency moves slowly, steadily, and within a narrow band of typically plus or minus 2 per cent within a period of six months. Such a pattern suggests that while the exchange rate is not fixed, it also does not float freely. Instead, the movement appears guided, controlled, and gradual, resembling a crawl,” said Ajay Kedia, MD, Kedia Commodities.

It signals that India prefers gradualism and predictability in exchange rate adjustments. During frequent global shocks, sudden currency swings can damage investor sentiment, disrupt import costs, and create uncertainty in financial markets. A crawl-like pattern helps maintain stability.

While currency depreciation increases cost for importers as well as exporters, who import intermediate goods, the crawl-like movement provides more predictability than sudden swings. This helps the trade hedge their risk better.

“Volatility is not good for trade and depreciation affects Indian importers as well as exporters with high import content. However, when the currency is moving in a band and is depreciating slowly, it is helpful for businesses to make necessary adjustments,” said Ajay Sahai, director general, FIEO.

“In the case of edible oil, the import bill this year is much higher than last year despite the volumes being lower. The currency movement and high prices have added to the import bill. For importers, hedging has become part of the business. As we expect the rupee to weaken, we buy forex in advance. It is better to earn slowly than take risks,” said B V Mehta, executive director of Solvent Extractors' Association.