India rupee hit by electronics imports and foreign digital services outflows, BDIA says

Rising electronics imports and payments for overseas digital services are adding to India’s trade gap. This trend is pushing the rupee to fresh record lows, according to Bharat Digital Infrastructure Association (BDIA). BDIA President Piyush Somani said these outflows now sit alongside crude oil as key pressures on the currency.

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The rupee slipped close to 97 against the US dollar on Wednesday. It later ended at a record low of 96.86 per dollar. Somani said the rupee had touched Rs 96.64 to the dollar a day earlier. Somani linked the fall to what BDIA called a growing "digital drain\".

Digital drain and rupee weakness

Somani described digital drain as money leaving India for electronics and foreign digital services. Somani said this is creating long-term pressure on the rupee. \"The rupee touched Rs 96.64 to the dollar yesterday - an all-time low - and we are continuing to lose ground. The conventional explanation blames crude oil and US interest rates. These are real, but they are no longer the dominant story. The new dominant driver of the rupees structural weakness is the digital drain,\" he said.

Somani said India’s merchandise trade deficit for FY26 was USD 333 billion. Somani said electronics imports were USD 116 billion within that total. Somani added imports were rising 17.8 per cent each year. Somani said electronics had overtaken petroleum as the fastest-growing import line.

Somani said digital services outflows were near USD 50 billion. Somani listed cloud, software, advertising, royalties, and AI services. Somani said the combined digital share now forms about half the merchandise trade deficit. Somani also said this shift makes the rupee more sensitive to technology-linked import costs.

Somani said memory prices had increased and lifted device costs. Somani also said the Middle East crisis had raised prices of key electronic components. \"Silicon is the new oil. Code is the new crude. And until policy responds to this structural reality, every intervention by the RBI is treating a symptom, not the disease,\" Somani said.

BDIA proposals on digital drain

BDIA said it submitted a five-pillar plan to the Government of India and the Reserve Bank. One proposal seeks a 6 to 8 per cent digital services tax. BDIA said the levy would apply to foreign cloud, software, and advertising revenue earned in India. Somani said it would restore symmetric taxation seen in the EU, the UK, and many G20 economies.

BDIA also urged closing a Luxembourg-and-Ireland routing loophole. Somani said foreign tech vendors can avoid Indian GST and corporate tax. Somani said this happens through distributor chains. BDIA further suggested extending reverse-charge GST to all B2B digital services used in India. BDIA said this should apply regardless of contract structure.

BDIA proposed a Digital Permanent Establishment definition for taxation. It would treat Indian users and Indian-located workloads as taxable presence. BDIA also suggested sovereign procurement rules for government and public-sector digital infrastructure. Somani said this would apply wherever Indian providers meet specification. Somani said the package could recover Rs 75,000 crore to Rs 1.25 lakh crore yearly.

Somani said BDIA also sought support for sovereign data centres. BDIA requested the Ministry of Finance and the Ministry of Electronics and IT Meity for a 20-year corporate tax holiday. Somani said this would apply to facilities meeting prescribed sovereignty standards. BDIA also asked for infrastructure status, long-tenor finance access, and lower customs duty on critical equipment.

RSS-affiliate Swadeshi Jagran Manch National Co-Convenor Ashwani Mahajan said the leadership supports the work of sovereign firms. Mahajan said funds for building infrastructure and improving lives should come from indigenous firms. Mahajan said this extra money would not come from foreign companies, as domestic capacity grows.

With inputs from PTI