There are different Reasons behind why the Indian rupee falls. The Indian money is known as the rupee and the worth of the rupee is impacted by different variables like expansion rate, unfamiliar trade framework, and so forth. The principal justification for the shortcoming of the Indian rupee is the rising import/export imbalance, absence of trust by unfamiliar financial backers and withdrawal in the securities exchange.
In this way, the worth of the Indian rupee diminishes. Accordingly, the costs of wares in the Indian market increment. Expansion doesn’t affect the country’s unfortunate populace as food turns out to be more expensive.
In any case, moderate expansion would imply that purchasers are bound to spread and partake in the economy. Besides, trades increment in light of the fact that the item is modest. This can house expansion and fortify Indian Rupee. India needs to build its products, support business and increment government spending.
What does the term “falling rupee” mean?
The Indian rupee is deteriorating when it depreciates versus the dollar on the foreign market. This implies that India will have to pay more when importing from the United States or any other nation because the payment is made in dollars, i.e., less import costs more.
Why the rupee falling ?
The increase in crude oil prices, the withdrawal of foreign capital from the Indian market, and the routine nature of domestic business are the key causes of this rupee depreciation. The benchmark for world oil, Brent crude futures, increased 0.72 percent to $123.15 a barrel. Foreign institutional investors sold more than they bought on the capital market, according to preliminary stock market data. Foreign institutional investors (FII) withdrew a record amount from the stock market in June—50,203 crores.
How will it affect you?
The devaluation of the rupee will make imports costlier. Since the rupee has weakened against the dollar, importers will now pay more for the same quantity and price. People who are aiming to study abroad during this time would see an increase in the amount of the fees. People residing abroad who send money to their families in India would cost more as they will end up sending more in terms of the rupee. On the other hand, the depreciation of the rupee makes exports cheaper.
Sectors being affected
India imports 20.96 per cent of its GDP. It includes mineral fuels, oils, electrical machinery, nuclear reactors, mechanical appliances, jewelry and many more. As all these imports are done in dollars, the weakening of the Indian currency against the dollar is affecting these sectors.
1. Oil and Gas
India imports over 85 percent of oil and half of the gas it consumes. As the dollar is touching the sky, this sector is adversely impacted. Crude importers (Indian Oil, BPCL, HPCL, RIL, Nayara), as well as gas importers (GAIL, GSPC), will have to face a rise in purchase costs.
Major raw materials such as crude and palm oil derivatives are imported and account for about half of the input cost. And now companies are increasing the prices to compensate for the higher input cost.
On average, India imports $56.73 Billion in electrical, and electronic equipment in 2021. About 40-60 per cent of the total input cost including components is imported; In smartphones, around 70-80 per cent of the input cost is imported. Now that the value of the dollar has increased, then their cost will also likely increase.
4. Telecom Services
Telecom companies spend around $6 billion annually on importing network gear. Gear imports become more expensive due to the depreciation of the rupee.
5. Renewable Energy
Indian solar plants are largely dependent on imported solar cells and modules. This will increase the cost of the project, higher tariffs in future bids and so on.
How to Overcome this Problem?
India needs to do intermittent improvements to overcome this problem.
- When most of the investors from other countries invest in India, the demand for the Indian rupee increases.
- When International consumers spend more currencies to purchase goods and services of our country, they need to convert their currency into the Indian rupee, thereby appreciating the demand for the Indian rupee.
- The Indians who are doing payments for imported goods from dollars and other currencies must do payments from the same country’s currency, not using the Indian rupee.
- India needs to increase its exports compared to imports.
The dollar is more powerful than the Indian rupee. Indian rupee value gets weaker due to various factors such as increasing trade deficit, lack of trust by foreign investors and contraction in the stock market. The rate of inflation is very high. The government should take care of this major problem and make relevant policies. The country should strengthen the export system so that the currency is valued when the payment is made in foreign currency dollars.When foreign investors and customers spend their dollars to take advantage of our country’s goods and products, the appreciation of the rupee arises.