New Delhi, May 14: The Indian rupee has crashed past the 77-mark against US dollar and continues to be on a roller coaster ride. A falling rupee puts the households in the country at a disadvantage as it increases inflation by making imports costlier. India’s economy being import-oriented, this has an adverse effect.
The rupee fell 0.5% to 77.6313 per dollar on Thursday. A volatile rupee is not good for the economy as it increases the inflation. Products like oil, edible oil, and a range of other non-farm commodities – will all get expensive. That means, from transport to food items, you end up paying more for everything.
Why is Indian rupee falling
The ongoing Russia-Ukraine war is a significant factor in the Rupee’s decline. The Western countries on Russia, the world’s second-biggest crude oil exporter has naturally disrupted the supply.
Also the global uncertainities created by the Russia-Ukraine war has forced foreign portfolio investors pull out money from the market. Also, the strengthening of the Dollar in line with expectations of better growth in the US economy has also impacted Indian rupee.
The pandemic-induced lockdown across the globe have badly affected economic activity there. India is naturally bearing the brunt.
What happens when Rupee falls
Petrol and diesel prices: A falling rupee has a direct impact on petrol, diesel prices. We are already seeing the impact as retail prices of the fuel are now at peak levels.
Inflation: A falling rupee leads to inflation. India is dependent on transportation of ts essential commodities, especially for fruits and vegetable through road. A rise in fuel, could increase the price of fruits and vegetables.
Rise in interest rates: The falling rupee, would also likely trigger a rise in interest rates.
Break to foreign trips: A falling rupee can also hurt you foreign studies or trips plan as studies abroad are likely to get costlier. If you’ve already planned to spend your holiday abroad, the rupee depreciation would mean shelling out more at those restaurants, train rides, shopping and so on.
FPIs may withdraw money from Indian markets: Foreign Investors tend to withdraw money from the stock markets, if the rupee falls against the dollar. No investor would like a situation when the currency is volatile. This may have some bearing on the stock markets.
FMCG products may become expensive FMCG products like soaps and detergents likely to be costly as a direct result of increase in crude prices, combined with a falling rupee.
Job crisis: Due to inflation, the overall economy takes a hit. That also means companies can postpone or slow the process of hiring. When investment goes down, obviously, it deepens the jobs crisis.
Story first published: Saturday, May 14, 2022, 2:36 [IST]