The value of the rupee goes down every day. This year was the first time it went up to 80 against the dollar. Due to several global economic factors, the Rupee has been fluctuating and eventually, it hit a new record low and went past the psychological 80-per-dollar mark.
What does it mean for a “rupee” to “drop”?
When the Indian rupee loses value against the dollar on the foreign market, what does it mean for the economy? This means that when India imports from the U.S. or any other country, it will have to pay more because the payment is made in dollars. In other words, less import will cost more.
India imports a huge amount of things: 20.96% of its GDP. Mineral fuels, oils, electrical equipment, nuclear reactors, mechanical appliances, jewellery, and many other things are among them. Since all of these imports are paid for in dollars, the fall in the value of the Indian rupee against the dollar is having an effect on these industries.
1. Energy
Over 85% of India’s oil and 50% of its gas come from outside the country. As the value of the currency goes up, this industry is losing money. The prices of crude (Indian Oil, BPCL, HPCL, RIL, and Nayara) and gas (GAIL and GSPC) may go up for companies that buy them.
2. FMCG
About half of the costs come from importing raw materials like crude oil and palm oil derivatives. Businesses are now raising their prices to make up for the higher costs of the things they use.
3. Technology
India will buy an average of $56.73 billion worth of electrical and electronic goods from other countries. A huge 40–60% of all input costs, including component costs, come from outside the country. This number goes up to 70–80% for cellphones. Since the value of the dollar has gone up, they may cost more.
4. Telecom services
Importing network equipment costs the telecom industry about $6 billion per year. When the rupee falls in value, the cost of imported goods goes up.
5. Alternative Energy
Most of India’s solar power projects use imported solar cells and modules. Because of this, the cost of the project will go up. For example, the next bids will have higher tariffs.
Why is the rupee going down?
The main reasons for this rupee depreciation are the rise in crude oil prices, the withdrawal of foreign capital from the Indian market, and the regularity of business in India. Early stock market statistics show that foreign institutional investors sold more than they bought on the capital market.
What difference will it make to you?
The price of imports will go up because the rupee is losing value. Since the rupee has gone down against the dollar, importers will now have to pay more for the same thing at the same price and amount. Those who wanted to study abroad during this time would have to pay more for tuition. People who live abroad but have family in India will pay more to send money to them because they send more rupees overall. But when the rupee falls, the cost of exports goes down.
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