What Everyone Needs To Know About The
Depreciation Of The Rupee Against The US Dollar
The
Indian currency is under pressure since the beginning of this year. There is a
constant debate among economic analysts regarding a further fall in the INR
against the USD. The uncertainty looming across the globe due to the Russia-Ukraine
war has further added pressure on the Indian rupee. With the growing inflation
and prices of daily use items going up, the depreciating rupee can have a troubling
effect on the common man.
How does the Weak Rupee Impacts Our
Economy?
India
is a net importer country i.e. its imports are more than its exports. The major
components of our imports include crude oil, metals, electronics, etc. The
payments for these imports are majorly made in US dollars. Now when the rupee
is weak, more amount needs to be paid for the same quantity. This leads to a higher
cost of raw materials and production. The ultimate increase in the cost of
products is passed on to the customers.
When
the rupee is weakening, it is a positive for exporters. Weak currency promotes
exports, as foreign purchasers have more buying power and shipments are
competitive. But when the demand is weak across the globe, the fall in the currency
is not supportive even for the exporters.
The
biggest impact of the falling rupee is rising inflation. India is one of the
biggest importers of crude oil globally. We import 80% of our oil requirements
from foreign countries. With the Russia-Ukraine war, the price of crude oil is over
$100 per barrel, leading to higher pay for our oil imports. The combination of
higher crude oil prices and the depreciating rupee adds more inflationary
pressure on the economy.
Can RBI Stop Falling Rupee?
The
Reserve Bank of India has taken several measures to slow down the fall of INR.
The RBI has recently sold dollars to shield the fall of the INR. With a strengthening
dollar, the foreign exchange reserves have declined significantly. The RBI has
said that it will further intervene to arrest the fall of the rupee and protect
the Indian economy from these jerky movements.
Despite
a fall in the INR against the USD, the Indian currency was one of the best
performing currencies globally. While other countries have seen a steep fall in
their currency, Rupee still managed to hold well. The falling Rupee also has implications
on the stock market and the performance of stocks of many companies. To take
advantage of the falling rupee in the stock market, you may consider opening a
demat account with Indira Securities.