![]() India depends heavily on crude oil imports to meet over 80 per cent of its energy requirements. High oil prices and a weaker rupee will only add to inflationary pressures in the economy. The global crude prices have sustained at over $100 a barrel since Russia's invasion of Ukraine in February this year. The falling rupee's biggest impact is on inflation, given India imports over 80 per cent of its crude oil, which is the country's biggest import. However, in the current scenario of weak global demand and persistent volatility, exporters are not supportive of the currency fall. On the other hand, a weakening domestic currency boosts exports as shipments get more competitive and foreign buyers gain more purchasing power. In such cases, the cost of raw materials and production goes up which gets passed on to the consumers. Now if the rupee is weak, it has to pay more for the same quantity of items. ![]() ![]() the country makes payments in US dollars. Since India mostly depends on imports, including crude oil, metals, electronics, etc. How does a weak rupee impact you and the economy? Speculations are there could me more aggressive rate hikes by the US Fed and that may further dent the Indian currency. Meanwhile, the US Federal Reserve recently increased the interest rates, and the return on dollar assets increased compared with those of emerging markets such as India. Such depreciation puts considerable pressure on the already high import prices of crude and raw materials, paving the path for higher imported inflation and production costs besides higher retail inflation. The rupee has depreciated 5.9 per cent versus the dollar so far this calendar year.Īs money flows out of India, the rupee-dollar exchange rate gets impacted, depreciating the rupee. The rupee has been on the decline since early this year, especially after supply chain disruptions in view of the Russia-Ukraine war, global economic challenges, inflation, and high crude oil prices, among other issues.īesides, there have been heavy foreign fund outflows from the domestic markets as the foreign institutional investors (FIIs) have sold shares worth $28.4 billion so far this year, outstripping the $11.8-billion sell-off seen during the Global Financial Crisis of 2008. The rupee's fall these days is mainly due to high crude oil prices, a strong dollar overseas, and foreign capital outflows. If a country imports more than it exports, then the demand for the dollar will be higher than the supply and the domestic currency like Rupee in India will depreciate against the dollar. If there is a higher demand for the US Dollar, the value of the Indian rupee depreciates and vice-versa. The value of the Indian rupee to the US Dollar works on a demand and supply basis. In the meantime, as the currency volatility continues, let’s decode what this means for you:. Union Finance Minister Nirmala Sitharaman, however, recently said that the Indian currency is relatively better placed than other global currencies against the greenback. ![]() Now, this is a double whammy for the common man with the country reeling under high inflation and the prices of everyday items drastically going up. However, on Thursday, it managed to recover from its record low after gaining 13 paise to hit 78.90 against the dollar. The rupee is down nearly 6 per cent since January this year. This has sparked a debate among analysts about whether the domestic currency could see further decline amid weak fundamentals. The Indian rupee has been on a downward spiral for the last few days and on Wednesday, it hit a record low of 79.03 against the US dollar.
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