Rupee breaches the 80 per US Dollar mark! How does it affect you? | Commercia Financial Services

<div class="blog-content"><h2><big>What seems to be a distant mark has been breached now. The Indian Rupee is luring around the 80 per US Dollar mark. A major reason behind this fall is the exit of Foreign Portfolio investors from the domestic market and the growing demand for the dollar. Most of the international trades are carried out in terms of US Dollars. With Inflation at its peak worldwide and supply chain disruption, the demand for the dollar is rising and so does its strength against other currencies. </big></h2>

<h2><big>But, how does this going to affect your lives? Let’s find out. </big></h2>

<h1><big><strong>Pay more for Daily Needs</strong></big></h1>

<h2><big>Whenever the rupee depreciates, the cost of imports rises. India mainly imports Petroleum Crude, LNG, Coal, Crude Palm Oil, Gold, and Diamonds. Out of the total imports, almost 24% of the imports account for Petroleum Crude which is the raw material for Petrol & Diesel. So, for the same amount of goods, India will have to pay more rupees. This will bore a hole in the pockets of the middle class by inflating the prices of Petrol, Diesel, Cooking Oil, FMCG products, Gold, and Diamonds.</big></h2>

<h1><big><strong>High Price of Consumer Electronics</strong></big></h1>

<h2><big>India imports almost 50-60% of the total components that are used in Consumer Electronics such as Computers, Laptops, Mobile Phones, and White Goods. Since the import costs have increased for the manufacturers, the costs of these Consumer Electronics could also be increased.</big></h2>

<h1><big><strong>Expensive Foreign Travel and Education</strong></big></h1>

<h2><big>With the freefall of the Rupee, pursuing education in foreign countries has also become costlier. This cost is above the already hiked education loan rates after the repo rate rise by RBI. Also, Foreign Travel and sending money from India to abroad has become costlier as you have to shell out more rupees.</big></h2>

<h1><big><strong>Blessing in Disguise</strong></big></h1>

<h2><big>Well, the Rupee is in big turmoil but it is raining money for exporters. India is a major IT service provider to the US. The Indian IT sector earns a large portion of its revenue from exports. Apart from this, India has become a major hub for manufacturing APIs after the Covid disruption which makes India a major exporter of Pharmaceuticals. Apart from these, we also earn export revenue from tea and apparel. So, without raising any prices, these exporters are getting more prices for their goods and services.</big></h2>

<h2><big>But, overall, a depreciating currency for any country is not a good sign in long term. Though, Indian Rupee has shown a relatively less fall in its value as compared to some other Asian countries.</big></h2>

<h1><big><strong>What is the government doing?</strong></big></h1>

<h2><big>To discourage imports of luxury items, the government has increased the import duty on Gold. The RBI has eased the regulations of investment in the Debt market so that Foreign Portfolio Investors could bring dollars into the country. The RBI had also hiked the repo rate which ultimately increased the interest rate on Fixed deposits. This move was to promote Indians to hold rupees in their bank accounts. To encourage Indian Companies to take loans in dollars, the RBI has increased the External Commercial Borrowing limit under the automatic route.</big></h2>

<h1><big><strong>To Conclude</strong></big></h1>

<h2><big>Though the Rupee is falling against the US dollar, the RBI measures have strengthened the rupee against some currencies. The Government is trying to green its reserves by increasing GST rates and import duty. All in all, the government is trying to reduce the burden on Rupee for import bills. </big></h2>

Updated at: 17/July/2023

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