The fall of the Indian currency and its Impact.
Soumya Evita
Jun 13, 2022
276
0
The Indian currency seemed to give the Indian investors a tough time. The currency of the country has reportedly collapsed by 54 paise to close at a record low of 77.44 against the US dollar. The local currency had stood at 73.77 to a dollar on January 12, 2022, and since then the currency has fallen about Rs 4 and touched 77.72 on Thursday. It weakened between January 12 and March 8 to hit 77.13 and then started to build up till April. But since April the currency has had a downfall and has touched the lows multiple times since then.
The rupee has decreased as compared to the US dollar due to the outrush of the foreign investments led by global uncertainties that rose because of some geopolitical crises on the war between Russia and Ukraine and a tight budgetary policy by the US Federal Reserve. The war between Russia and Ukraine with the resume of the Covid-19 lockdown in China has aggravated inflationary pressure. The Indian research said rising inflation in advance economics has promoted global central banks to raise their policy rates before the RBI’s policy action in May 2022. The US fed raised its policy rate by 25 bps in March, after a gap of almost three years, and followed it with another 50 bps.
Impacts
The falling of the rupee is most likely to impact the decisions of the households as certain goods or services are getting expensive.
- Oil prices have increased since India produces a major chunk of it.
- The country’s imports are getting costlier with the fall in rupees and also the stoking inflation in the country which is said to be totally out of RBI’s zone.
- Sectors such as fast-moving consumer goods are at the receiving ends.
- Export-oriented sector stocks such as specialty chemicals and textiles can be better during the rupee fall as weaker rupee can boost exports.
- Another major impact of the falling rupee might be felt in the tourism sector. With the summer holiday around the corner, many people would want to travel abroad and might end up spending much more than they normally do.
Comments (0)