Rupee Woes To Hit Consumers Hard As Price Across Goods Increase

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    The rupee in Friday's chased a new low, hitting a new all time low at the time of closing of 70.99, and the scenario is likely to sustain given the crude oil price increase. It is to be noted that while the rupee's depreciation to new lows means good gains for companies engaged in the business of exports such as pharma and IT, nonetheless for mass markets it will be pose a burn on their pockets as after some relief on a wide number of goods and services due to GST rate reduction, the prices on a wide range of goods is again set to rise.

    Rupee Woes To Hit Consumers Hard As Price Across Goods Increase

    Also, this time it has reported that has not taken any aggressive stance to curb the new low reached in the rupee as it will drastically then impact India's forex reserves which have already been declining for some time now. As per the report by HDFC Bank's Chief economist, RBI's intervention has scaled down after spending close to Rs. 2500 crore. The report also added, the threshold limit (for the intervention) has increased from 69 levels a month ago to around 70.6 now.

    Rupee this year has lost a huge 10% on the back of several of geo-political concerns such as the recent turkey crisis which resulted in the rout among emerging market currencies including Indian rupee. Also, the rising crude oil prices have only added to the trouble.

    Rising dollar and depreciating rupee directly impacts input cost of consumer appliances: As the currency fluctuation impacts the input cost for a variety of goods, businesses engaged in dealing and distributing consumer appliances will have a rub off effect as the earlier price decrease due to GST rate cut will now be reversed with a price increase of 3-4%. The rate hike will be effective from today i.e. September 1.

    LED bulbs: The use of LED lighting which has increased due to the cost efficiency will see a hit in demand as the price are set to increase at the rate of 5%. The LED industry is import driven and the rupee volatility will increase the manufacturing cost by 1.5-2%
    Steel and stainless steel items: Due to the imported raw material, there shall be an increase in the input cost in the manufacture which shall be transmitted to consumers as higher prices.

    Fertilisers: The natural gas for urea and other raw material import for patash and phosphate based fertilizers will increase the working capital cost for these companies. For the consumers, there is a relief in sight as the international prices of edible oil are at the lowest.

    Fuel and LPG price increase: Diesel price has hit another new highs and the situation is the same for petrol as well. Domestic LPG or cooking gas prices have also trended higher per cylinder by Rs. 1.49 to Rs. 499.51 in case of subsidized LPG while for non-subsidized LPG gas, the rate hike has been brought about by Rs. 30.50 in the national capital.

    Goodreturns.in

    Read more about: rupee dollar input cost gst
    Story first published: Saturday, September 1, 2018, 10:34 [IST]
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