India is dependent on imports from other countries for everything from oil to essential electric goods and machinery as well as mobile-laptops and other gadgets. Most mobiles and gadgets are imported from china and other east Asian cities and most of the business is done in dollars. If the rupee continues to depreciate like this, imports will become costlier in the country.
The fall in the indian currency rupee against the US dollar has continued for the past several days and the rupee is continuously touching new lows. However, in early trade on Wednesday, it saw a correction of nine paise and is currently at 77.69. But after several days of decline, this improvement is very minor. We are telling you what are the reasons for the fall in the rupee and how can it become a problem for the common man?
Major reasons for the fall in rupee
The indian currency rupee has continued to decline since the past days. It had slipped to 77.78 against the dollar. There are several reasons for this breakdown, including a 50-basis-point rate hike by the US Federal Reserve and indications of more rate hikes in the coming months. Apart from this, continuous selling by foreign investors from indian markets is also a major reason for its fall. Whereas, the protracted war between russia and ukraine and the geopolitical situation arising out of it has also increased the pressure on the rupee.
Effect of sell-off of foreign investors
Experts say that when there is turmoil in the international markets, investors turn towards the dollar. When the demand for the dollar increases, then the pressure on other currencies increases. Talking about the uncertainty around the world, due to the Corona epidemic and the ongoing war in Russia-Ukraine, there has been a supply interruption, which is going to create chaos around the world. people look for safe havens when there are times of uncertainty and the dollar is considered a safe haven. Selling by foreign investors affects the foreign exchange reserves and increases the demand for the dollar, while the demand for the rupee decreases.
Estimated break of Rs 81
Amid the continuing fall in the rupee, a report quoted experts as saying that the rupee may hit an all-time low of 81 against the dollar in the coming days. That is, a further decline can be registered in it. However, in the meantime, he has expressed the possibility that after breaking this level, it is possible for the rupee to rise again. It is worth noting that due to the breakdown of rupee, a big impact is seen in many sectors. This will see an increase in the prices of everyday commodities from oil prices.
Major impact of weakness in rupee
Significantly, india is dependent on imports from other countries for gadgets including mobile-laptops along with essential electric goods and machinery. Most mobiles and gadgets are imported from china and other east Asian cities and most of the business is done in dollars. If the rupee continues to depreciate like this, imports will become costlier in the country. Due to imports from abroad, their prices are sure to increase, which means inflation on mobiles and other gadgets will increase and you will have to spend more. Also, let us tell you that india buys 80 percent of its crude oil from abroad. Its payment is also done in dollars and due to the cost of dollars, the rupee will cost more. Due to this, freight will be expensive, due to its effect, inflation will be hit further on everything needed.