How the rupee falling will affect you as a consumer?
The Indian Rupee has created a panic among the investors as well as the common man who is not sure about how this entire thing is going to affect him/her. On Monday, it opened at 79.76 in the interbank foreign exchange market but dropped to a record low of 80 during day trading. Although the falling rupee closed at 79.98, it still is not a good sight for the Indian entrepreneurial spirit.
This unexpected fall of the Indian rupee means that the Indian currency is weakening. This means that for every dollar, we will have more rupees. Particularly when the traders in India are importing any kind of products, they will have to pay more money for the same amount. This kind of scenario of rupee falling is discouraging to trade and commerce.
Most of the items imported by India are from sectors such as mineral fuels, oils, electrical machinery, nuclear reactors, mechanical appliances, jewellery, and many more. Imports make up a share of 20.96 percent of the GDP. So, the falling rupee will affect these sectors first and foremost.
The impact of the rupee falling can be described in the following sectors can be described it as:
1. Oil and Gas
Over 85% of the oil and 50% of the gas that India uses are imported. This industry is being negatively affected as the currency soars. Importers of crude (Indian Oil, BPCL, HPCL, RIL, and, Nayara) and gas (GAIL, GSPC) may experience an increase in purchase costs due to the rupee falling in the market.
More than 85% of the oil and 50% of the gas consumed in India are imported. This industry is suffering as the value of the dollar soars. Increased purchasing costs would be experienced by importers of crude (Indian Oil, BPCL, HPCL, RIL, and Nayara) and gas (GAIL, GSPC) due to the rupee falling scenario.
Indian imports of electrical and electronic equipment will be $56.73 billion in 2021. A whopping 40–60% of all input costs, including component costs, are imported; in cell phones, this percentage rises to 70–80%. They will probably cost more now that the value of the dollar has grown.
4. Telecom Services
The cost of importing network equipment is roughly $6 billion per year for the telecom industry. The depreciation of the rupee raises the cost of imported gear.
5. Renewable Energy
Each year, the cost of importing network equipment by telecom companies is over $6 billion. As the rupee falls in value, imports of gear become more expensive
How the crude oil prices are responsible for rupee falling?
More than 80 percent of the energy requirements of our country are met by crude oil imported from outside India. When the price of crude oil in the world market increases, then the bills soar high for the Indian Government. Suddenly, there is an increase in the demand for crude oil all over the world. This directly influences the demand for dollars and strengthens the dollar against the Indian rupee. As a result, the purchasing power of the Indian rupee erodes in the international market. The crude prices are believed to go up further and this will again decline the Indian Rupee more.
Why is the rupee falling?
The increase in crude oil prices, the withdrawal of foreign capital from the Indian market, and the routine nature of domestic business are the key causes of this rupee depreciation.
The benchmark for world oil, Brent crude futures, increased 0.72 percent to $123.15 a barrel.
Foreign institutional investors sold more than they bought on the capital market, according to preliminary stock market data.
Foreign institutional investors (FII) withdrew a record amount from the stock market in June—50,203 crores.
How will the rupee falling affect you as a consumer?
The rupee falling will directly impact the people living in the country as the imports will become more expensive and the exports will become cheaper. This means that all products in the market will see a raise in their prices and so you will have to pay more. Inflation is going to rise in the Indian markets. Fuel prices will rise as the imports of crude oil become more expensive. Students who want to take admitted to foreign universities will have to pay more money in fees. It will be better to spend wisely at this time.
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