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Friday, March 29, 2024

As Indian rupee value falls, here is how it will affect your life

EconomyAs Indian rupee value falls, here is how it will affect your life

#RupeeAt80 is going to impact goods, travel, jobs, rural life accelerating high inflation with the falling #rupee

The fall of the Indian rupee to 7 percent in just six months spurring on the depreciating value of the rupee vis-a-vis the dollar brings worrisome news to the Indian economy which was slowly getting back on track after being hammered by the Covid-19 pandemic long lockdowns.  As the rupee falls, foreign investors will look to pull out of Indian equities, leading to a sharp fall in equity markets. This will result in a decline in stock and mutual funds investments inflicting higher inflation.

The DeshBhakt tweeted, “Earlier it was foreign (anti-national) rankings that used to warn us about our economy; now even Govt/RBI data shows the truth.
Not just #RupeeAt80 but #CAD #Inflation #RuralDistress #Jobs #PSUs #PF & more.
You thought that the #Bulldozers will spare u?”

Concerned voices share:

3 things at 80/$
1. Lower levels coming, use “record fall” wisely
2. RBI’s policy interventions aren’t creating any short term cushion.
3. Most important; it’s not what the Rupee now falls to. It is what becomes the new range/level for it over the next few years.
#RupeeAt80

The depreciating rupee is likely to have a direct impact also on spending as oil, imports, loans, etc. will get pricey. Increasing prices might also accelerate inflation.

As the rupee dips, importing items will get expensive, as importers need to buy in dollars to pay for the goods. Oil imports will get costly too, which can directly impact one’s expenses. Not only imported items, but components will also get costly, which will shoot up the prices of goods like cars and appliances.

There is likely to be an indirect impact on loans. Since import prices go up with a depreciating rupee, it makes items and commodities more expensive, pushing inflation. When inflation spikes, RBI sweeps in to alter the repo rate, which is currently at 4.90 percent. Now, with high repo rates, loan rates also get expensive.

It must be mentioned that inflation and repo rates move parallelly, as interest rates are hiked to stabilize inflation and make borrowing costlier.

Luxury cars or car components that are imported will get expensive.  Phones and appliances that require imported components will also, hence, get expensive.

Foreign education will also get more expensive as students will have to spend more rupees for every dollar. Students planning to go abroad, especially to the US, must re-think their budget accordingly.

Travel is another sector that will be impacted, especially since it has just begun picking up after the pandemic. Travelers from India will now have to spend more on their holidays.

On Monday, the Finance Ministry said at the Lok Sabha, “Global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions are the major reasons for the weakening of the Indian rupee against the US dollar,” further adding that global currencies such as the British pound, the Japanese yen, and the Euro have weakened more than the Indian rupee indicating that the Indian rupee strengthened against these currencies in 2022.

Asheesh Chanda, founder & CEO of global wealth advisory platform Kristal.AI, said that it is a sign that global investors are choosing the safety of US markets over the recession risks of the EU.

“The impending threat of Russia cutting off gas supplies in winter coupled with the slow intervention by the ECB to control inflation means that the recession in the EU looks imminent. Hence, investors are selling euros and buying dollars. It also reinforces the importance of USD as the safest currency during times of uncertainty,” Chanda said.

Chanda also added that now would be a good time for Indian investors to dollarize their investments, as the rupee is expected to decline further.

Jateen Trivedi, VP Research Analyst at LKP Securities said, “The lack of intervention from RBI could also weigh on sentiments on rupee weakness. Rupee weakness can continue till the time it trades below 79.25 in a short-term basis towards the 80.50-80.75 zone. The dollar index staying above 105 also keeps added strain on the rupee. Further crude prices action along with FII’s inflow outflows shall also give cues to rupee moves.”

One bright spot in all this is for non-resident Indians (NRIs) sending money back home from the US as they will end up sending more in rupee value. Exporters of goods and services are also likely to be benefited from the depreciation of the rupee as exports will now become more competitive

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