Rupee falls to all-time low of 80 per dollar, what does this mean for you?
After breaking a series of all-time lows and tracking a massive greenback, after breaking a series of all-time lows and falling over 7 per cent from around 74 to early 2022 this year, the rupee touched 80 per dollar on Tuesday for the first time.
What does the rapid depreciation of the rupee mean to you? Here are your five-point highlights:
High Cost of Import: A weaker currency makes international purchases more expensive as you need to pay more rupees for the same product than before. For example, if you were getting a foreign product for $1 in January, you would have paid Rs 74 at that time. But with the Indian currency weakening to 80 per dollar, you will not need to pay 80 rupees for the same product. The current trend suggests that further weakening of the rupee may lead to further upside in foreign goods prices.
Higher fuel and energy prices: India imports more than 80 percent of its oil needs, and a weak currency adds to the cost of international oil and energy products. This will result in higher fuel and energy prices for consumers in India as oil refineries and marketing companies pass on the additional exchange rate burden. Oil prices have risen 2 per cent due to global factors, but 6 per cent higher due to rupee depreciation.
High Inflation: According to RBI’s April monetary policy report, if the Indian rupee depreciates by 5 per cent from the baseline (76 per dollar), inflation could rise by around 20 bps, while gross exports could rise by around 15 bps. .
Pay more for overseas education and international travel: A weaker currency would mean that you will now have to pay more for the same overseas education and international travel than before. For example, if the cost of traveling to an international country in January was $1,000, which was Rs 74,000 at that time, but now you have to pay Rs 80,000 for the same trip. The rupee has depreciated more than 7 per cent against the dollar this year, indicating that US education and travel have become 7 per cent more expensive in the past six months.
Upside – Indian exports become more desirable: A weak currency helps exports and makes Indian goods competitive in international markets. Exporters who used to get Rs 74 for a dollar of product will now get Rs 80 for it.