How The Rupee At 72 Is Hurting You And Me?

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    The rupee has plunged to 72 levels, over strength in the US dollar, following a collapse in the Turkish Lira and the Argentinian Peso. This has had a huge impact on emerging market currencies, including India, which saw the rupee hit a new life time low of 72.10 against the dollar.

    Here are 7 ways the falling rupee at 72 will impact you and me.

    1) Petrol and diesel prices


    We are already seeing the impact of the falling rupee on petrol and diesel prices. Retail prices of the fuel are now at peak levels. Petrol price in Mumbai is now at near record levels of Rs 87, and diesel prices are retailing at Rs 76 in the city

    How The Rupee At 72 Is Hurting You And Me?
    India imports bulk of its crude oil requirements. So, if the rupee has fallen from levels of Rs 65 to 72 and all other things are constant, be prepared to pay 10 per cent more for fuel. One reason, why fuel prices in India has risen is on account of the falling rupee.

    2) Inflation

    As the rupee falls and petrol prices rise, it leads to inflation. Remember that in India a lot of transportation, especially for fruits and vegetable happens through road. A rise in fuel, could increase the various components of the CPI, including petrol, fruits and vegetables.

    This is not good news for consumers.

    3) Rise in interest rates

    The falling rupee, would also likely trigger a rise in interest rates. Remember, that the RBI is mandated to control inflation, which means it could raise interest rates to tame inflation.

    In fact, the CPI for the month of Aug did fall. A hike in interest rates in the forthcoming months cannot be ruled out. This means your borrowing costs on home loans, auto loans, personal loans and gold loans would increase.

    4) Foreign studies or trips

    Foreign trips and studies abroad are likely to get costlier. 10,000 dollars for travel purposes, which would cost Rs 6.6 lakhs a year ago, would now cost Rs 7.2 lakhs.

    Similarly, your trip abroad would have cost less about a year ago, than today.


    5) Current account deficit

    A falling rupee, along with a rise in crude prices can cause severe damage to economic growth.

    The Economic Survey in 2018 estimated that a $10 per barrel increase in the price of oil reduces economic growth by 0.2-0.3 percentage points and worsens the current account deficit by about $9-10 billion dollars.

    6) FPIs may withdraw money from Indian markets

    Foreign Portfolio Investors tend to withdraw money from the stock markets, if the rupee falls against the dollar. In dollar terms their portfolio value tends to get eroded.

    No investor would like a situation when the currency is volatile. This may have some bearing on the stock markets.

    7) FMCG products may become expensive

    FMCG products like soaps and detergents tend to become more expensive, as a direct result of increase in crude prices, combined with a falling rupee.

    Read more about: rupee dollar currency
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