Dollar vs. Rupee: What effect will the fall of the rupee have on your life? Will inflation rise and the stock market fall?

Dollar vs. Rupee: On Thursday, a dollar became 77.72 rupees. This is the lowest level of Indian currency ever. Will this depreciation of the rupee further boost the inflation that is already wreaking havoc? What effect will this fall in the rupee have on different parts of the economy?

The rupee falls to a new low: how it affects the Indian economy: The depreciation of the rupee against the dollar is not taking its name to a halt. On Thursday, one dollar converted to 77.72 rupees and the country’s currency closed at a new record high. This fall in the rupee has led the government to the target of the opposition. Congress launched a scathing attack linking it to government failure and general inflation. Party spokesman Randeep Singh Surjewala wrote on Twitter: “The rupee has dropped once again! There is competition between rupees, petrol and gas cylinders! All Indians are worried, but the Prime Minister and Minister of Finance do you care

Questions will arise about the fall of the rupee!

In any strong democracy, the job of the opposition is to highlight the shortcomings of the government and to ask questions in the interest of the citizens. But is the Indian opposition playing the same role in asking this question to the government? Are your questions valid? Is it right to surround the government by adding the falling rupee and soaring prices for petrol and cooking gas? In the world of politics, the answers to these questions will be given according to your political tendencies. But seeing the continuing fall of the rupee, questions must be emerging not only in the minds of opposition leaders but also in the minds of ordinary people. The question is, what will be the impact of the fall of the rupee on the country’s economy? And to what extent will it affect the lives of ordinary people?

The fall of the rupee means a heavy import bill

The direct effect of the fall of the rupee on the country’s economy is that our import bills are rising. That is, the goods we buy abroad, when the rupee depreciates, we have to pay more than before. For example, when the dollar was worth 75 rupees, I used to pay 7500 rupees for one hundred dollars goods, but if the dollar becomes 78 rupees, we will have to pay 7800 rupees for the same item. Considering the whole country as a unit, the price pressure increases on the whole import bill of the country.

Expensive imports mean a rise in prices

If the cost of buying something abroad increases, its prices in the country will also increase naturally. We know that a large part of India’s import bill consists of crude oil, which is refined to make gasoline-diesel. We also import on a large scale the LPC or PNG gas that is used to cook in our house or that is filled in CNG cars. Obviously, when the value of the rupee drops, that is, the dollar becomes expensive, its cost also increases. That is, there is also a bad effect of the fall of the rupee as its already skyrocketing prices become stronger. In recent days, the speed with which the government has raised the prices of CNG, fuel to fill the plane, ATF and LPG, has a little hand in the fall of the rupee.

This effect of the fall of the rupee not only on fuels such as gasoline-diesel, CNG and LPG, but also on all imported things. These include everything from edible oil to fertilizers and steel. Not only that, it also increases the cost of goods made using these imported things as raw material. Obviously, a major effect of the rupee fall is also seen in the form of rising inflation.

A bigger challenge for the Reserve Bank

The inflation rate in the country is already breaking old records. The pace of rising prices, both wholesale and retail, is steadily rising, so how far the impact of the rupee fall will go is a matter of concern for everyone. Especially for the Reserve Bank, a weak rupee is a big challenge. Because on the one hand, his efforts to control prices by raising interest rates have a setback, and on the other hand, to control the fall of the currency, he has to spend the precious foreign currency he has with him buying rupees. abroad. foreign exchange market. It has recently been reported that the Reserve Bank has spent more than $ 20 billion on the foreign exchange market during the month of March just to stop the rupee from falling. In the current environment, the possibility is increasing day by day that the Reserve Bank will raise interest rates again in the June monetary policy review. This will further increase the cost of capital in the country, which can have a negative effect on the economic recovery.

What is the export benefit?

The fall of the rupee is generally considered good news for exporters. This is due to the fact that when the rupee depreciates, the price of Indian goods and services in the foreign market decreases, which is expected to increase its demand. Also, by changing the payment received in dollars for rupees, the amount received increases. But a situation like an economy gives more benefits to those countries, which import less and export more. But the situation in India is the opposite. As a country, we export much less than we import. This is the reason that despite the 24.22 per cent increase in Indian exports in April, our trade deficit, i.e. the trade deficit, instead of decreasing, increased around 33 percent to $ 20 billion. According to a report, the country’s current account deficit (DAC) is expected to increase to 2.6% of GDP in 2022-23, while in 2021-22 it was equal to 1.7%. of GDP. While the value of the rupee is steadily declining during this period. Obviously, a weak rupee is not proving to be useful in India’s international trade in general.

There is also an effect on the stock market

The continued fall of the rupee is also not good news for the stock market. This is due to the fact that foreign institutional investors (IFIs) are already withdrawing money due to firm interest rates in the US. According to NSDL data, foreign investors have sold shares worth more than 1.38 billion rupees this year. Due to the continuing depreciation of the rupee and the strengthening of the dollar, they will start withdrawing money even faster. And doing so will become one more reason to increase the weakness of the rupee. In this way, there is a danger that the Indian currency will be trapped in a vicious circle, which could further fuel the fire of inflation in the country.

Foreign debt and interest charges will increase

One of the main and direct disadvantages of the rupee depreciation is that it entails a sudden increase in all foreign currency loans and interest paid. These include government-contracted foreign loans, in addition to government-contracted foreign currency loans and private banks and companies. The amount of interest to be paid on all these loans suddenly increases due to the fall of the rupee. If this company or bank earns more in rupees, it will cost you more to pay the loan fee and foreign currency interest.

The difficulty will increase for students studying abroad

The depreciation of the rupee has a direct impact on students studying abroad, who depend on their parents living in India for most of their expenses. It is also a growing financial burden for Indians going abroad.

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