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      Explained : Why Rupee is Falling and How will it Affect You

      Indian rupee is falling day by day as it fell to the level of 80 for the first time against the dollar. Indian rupee close at 79.98 with a fall of 16 paise.

      The rupee open at 79.76 in the interbank foreign exchange market and touch a psychological low of 80 during trading.

      After the situation improve and it close at 79.98.

      On Friday, Indian rupee close at Rs 79.82 per dollar, up by 17 paise against the dollar.

      And now again it hit its all-time low and breach the psychological mark of 80 per dollar. 

      What is the meaning of “Falling Indian Rupee”?

      A fall in the Indian rupee against the dollar in the forex market means that the Indian currency is weakening.

      Means, that while importing from the United States or any country, India will have to pay more because the payment is done in dollars,i.e., less import cost more.

      Which Sectors being Affected?

      India imports 20.96% of its GDP.

      It includes mineral fuels, oils, electrical machinery, nuclear reactors, mechanical appliances, jewellery and many many more.

      As all these imports are done in dollars so the weakening of the Indian currency against the dollar is affecting these sectors. 

      Oil and Gas

      India imports over 85% of oil and half of the gas it consumes.

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      As the dollar is touching its high, this sector is adversely impact.

      Crude importers (Indian Oil, BPCL, HPCL, RIL, Nayara), as well as gas importers (GAIL, GSPC), will have to face a rise in purchase costs. 

      FMCG

      Major raw materials such as crude and palm oil derivatives are import and account for about half of the input cost.

      And now companies are increasing the prices to compensate for the higher input cost. 

      Electronics 

      On average, India imports $56.73 Billion in electrical, and electronic equipment in 2021.

      About 40% to 60% of the total input cost including components is import.

      In smartphones, around 70% to 80% of the input cost is import.

      Now that the value of the dollar has increase, then their cost will also likely increase. 

      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. 

      Renewable Energy

      Indian solar plants are largely dependent on import solar cells and modules.

      This will increase the cost of the project, higher tariffs in future bids and so on. 

      Why is the Indian rupee falling?

      The main reason for this fall in the rupee is the rise in crude oil prices, foreign investors withdrawing money from the Indian market and the monotonous environment of domestic business.

      Brent crude futures, the global oil benchmark, jump 0.72% to $123.15 per barrel.

      According to provisional stock market data, foreign institutional investors were net sellers in the capital market.

      In June, Foreign Institutional Investors (FII) have withdrawn a record ₹50,203 crores from the stock market. 

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      How will it Affect You?

      The devaluation of the rupee will make imports costlier.

      Since the rupee has weak 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. 

      The depreciation of the rupee makes exports cheaper. 

      Disclaimer: The views of the writer do not represent the views of 2YoDoINDIA. Nor does 2YoDoINDIA endorse the views of the writer.

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