How the weakening rupee is impacting Indians travelling abroad

Until recently, there has been a noticeable surge in the number of Indians opting to travel internationally. While United Arab Emirates, the United States, and Thailand have mostly been the preferred destinations, newer and lesser-explored countries like Azerbaijan, Vietnam, Kazakhstan, and Bhutan have swiftly emerged to top and gained interest amongst tourists of all age groups -- from couples to young solo travellers.

According to a report, in the last six months, the INR has depreciated by about 3.21% against the USD. As currently, the exchange rate stands at approximately ₹87 per $1. This clearly shows that a weaker rupee means your travel budget shrinks.

Indians are investing more than ever in international travel, whether it is to enjoy varied landscapes, cultural encounters or culinary delights. However, this pattern has recently changed, owing mostly to currency swings. The rupee's depreciation versus other major currencies has pushed many travellers to either postpone their overseas vacation plans or choose a more affordable destination.

A sector that rapidly evolved from being a niche industry to a mainstream aspiration, which propelled outbound tourism growth, has yet again come to a standstill because of currency uncertainty, rising airfare, escalating food expenses, and expensive accommodations. The impact of this is especially evident among tourists from India and Southeast Asian regions, who planned to travel to the Western countries with a stronger currency. A shift in unfavourable exchange rates has created a ripple effect, leaving tourists with little to no option but to adjust in their choices.

Consider, for instance, a four-member Indian family, planning to travel to the United States. An estimated ₹5,00,000 was their budget a year ago when the value of the dollar was around ₹85. Given the current circumstances, the same trip would cost about ₹5,30,000, with the value of rupee at ₹85 to the US dollar and an increase of ₹30,000. Due to similar changes in the cost incurred, several tourists are restructuring their budgets, minimizing their expenses on leisure activities, shortening the duration of their trips, and exploring alternative travel options.

“The rupee’s depreciation is directly impacting the affordability of international travel. Travelers are adapting by choosing destinations with lower currency fluctuations and planning their forex needs well in advance. We are seeing a growing interest in forex cards and early currency booking to mitigate unpredictable exchange rate swings. At Prithvi Exchange, we encourage customers to strategize their forex requirements ahead of time to ensure cost efficiency,” says Pavan Kavad, Managing Director of Prithvi Exchange (India) Limited

Impact on business and student travellers

Not only tourists, business travellers and students, too, are feeling the effects of a declining rupee in different but related ways. Even the biggest of corporates are combating their international travel expenses for employees by either prioritizing highly-essential travel plans or emphasizing on hosting virtual meetings. This shift in trend is prompted by a desire to save money while increasing efficiency in a volatile currency environment. For the student community, tuition and living expenses have surged multifold, making studying abroad more expensive than ever. In fact, many students are now looking for additional financial aid through scholarships and part-time jobs to cover the mounting costs.

Managing Forex Smartly

The Indian Rupee has been losing value against all major currencies for quite some time now. While Indian travellers can do little about it, but surely some early planning and choosing the right forex option would at least hedge against the falling value of the Indian Rupee.

To mitigate these increasing expenses and navigate the economic uncertainties, travellers are pre-booking forex at locked-in exchange rates, which helps them avoid last-minute currency fluctuations. Many people are also increasingly relying on forex cards that have a lower transaction cost and higher conversion rate as compared to cash or credit cards. These financial solutions have enabled travellers to better manage their expenditures and reduce foreign exchange losses.

Sudarshan Motwani, Founder & CEO, BookMyForex.com said, “Using an INR credit or debit card for international transactions is a strict no-go as it comes with foreign transaction fees (3-5%) and Dynamic Currency Conversion (DCC) markups (5-7%), significantly increasing costs.

Additionally, exchange rates on INR cards are unpredictable and can fluctuate throughout your trip, leading to unnecessary expenses. Instead, opt for a Forex Card, which eliminates these charges, locks in favourable exchange rates, and allows you to make payments in the local currency, ensuring a seamless spending experience. Forex cards offer Zero-Markup on interbank rates, allowing travellers to lock in the best forex rates amid rupee depreciation.”

“For multi-country trips, a Multi-Currency Forex Card is the best option as it helps avoid unnecessary cross-currency conversion fees. Additionally, planning your forex purchase in advance is crucial. RBI allows forex purchases up to 60 days before travel,” added Motwani.

Monitoring exchange rates and purchasing forex in smaller tranches is another solution to securing better deals over time.

Conclusion

While overseas travel remains a top goal for many Indians, financial planning has become equally important. The weakening rupee has pushed travellers of all kinds - be it students, tourists, or corporate employees - to look for cheaper alternatives, plan their FX needs carefully, and modify their buying habits. With a well-thought-out approach, Indian travellers can continue to have a seamless travel experience, without burning a deep hole in their pockets and while mitigating the effects of currency fluctuations.