Here's how the falling rupee could affect the common man

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Published: Monday, June 25, 2012, 8:48 [IST]
 
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Here's how the falling rupee could affect the common man

The rupee has lost almost 26% in the last one year, affecting individuals and corporates. Here's how the falling rupee could make life easier or difficult for individuals and corporates.

Makes oil imports costlier

The falling rupee leads to an increase in the cost of imported crude. Crude oil is refined to make petrol and since petrol is a de-regulated item and aligned to market rates, the oil marketing companies (HPCL, BPCL and Indian Oil) tend to increase the petrol rates at the retail level. So individuals may have to brace to for a fresh round of petrol hikes, if the rupee falls and crude prices do not. Fortunately in the last few weeks crude oil has fallen in tandem with the rupee.

Leads to inflation as imported items become costlier

Since imported items including crude oil becomes costlier, a fall in the rupee against the dollar tends to increase inflation.

Benefits NRIs

Non resident Indians get more for the dollar as the rupee falls. It particularly helps poor Indian labourers working in the Gulf countries, as the Gulf countries have pegged their currency to the dollar and there is no interbank currency trading.

Gold imports get costlier and domestic gold prices rise

Cost of imported gold gets expensive and hence domestic gold gets more expensive, unless globally gold prices fall.

Foreign travel gets expensive

Those travelling abroad who need to carry dollars, have to tender more in Indian rupees for every dollar. In short falling rupee ensures that those travelling/holidaying abroad now have to pay more.

Studying abroad gets expensive

Like foreign travel, studying abroad gets expensive.

Benefits export oriented companies

Companies like software development companies, engineering companies and pharma companies that export their products and services benefit when the rupee falls, as they now get more for every dollar of goods and services exported.

GoodReturns.in

Topics: currency, crude oil, gold
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