IMPACT OF WEEKER RUPEEE
Weaker rupee complicates government’s battle against runaway inflation. Imports
become more expensive. The focus is particularly on crude oil price.
The dramatic dip in rupee’s value has a very bad impact on the economy. While many currencies have been weakening against the dollar, India has been the worst performer in Asia.
Due to the Financial market turmoil, foreign capital inflows have almost dried up, but the demand for Dollars is rising. India’s crude oil import bill has become staggering. Due to rise in the Crude Oil Price, the Oil Marketing companies are shelling out 40/50 dollars more /barrel. Hence there is an increase in the Dollar demand, which have been almost sucked.
With the increase in dollar rate, the rupee remains weak & Indian imports of Crude Oil, edible oil, pulses & Capital goods becomes more expensive. The rise in dollar rate adversely impacts government’s efforts to curb inflation.
Higher oil prices put pressure on inflation, but it helps some importers to import Capital Goods. Input costs go up across import-intensive industries.
If Chinese Yuan appreciates, a weaker rupee works to India’s export advantage. Some opine that “a dip in the rupee helps Industry; particularly exporters, to meet the cost & wage bill better.”’. In the times of global slowdown, the exports get the edge. Higher exports stimulate better jobs & discourages imports.
With Crude Oil price hiking, Rupee remains week. It’s only after, the Global Credit market recovers & There’s an increase in the inflow of the Capital, which eases pressure on rupee.
A depreciated rupee sometimes gives the economy a much-needed push.