Indian Rupee Falls Past 80/Dollar-Mark For The First Time. Reasons Behind The Fall & How Does It Affect You?

 Indian rupee on Tuesday fell past 80 versus US dollar for the first-time ever. 

 The value of rupee against the dollar has fallen by Rs 16.08 (25.39 per cent) in the last eight years. In 2014, the exchange rate was Rs 63.33 to a dollar, according to the Reserve Bank of India data.

The Indian rupee declined 7 paise to an all-time low of 80.05 against the US dollar in early trade, PTI reported.

The rupee has been staggering since the beginning of the year and has fallen 7.6 per cent so far. Indian rupee’s loss meant gains for the US currency.

In fact, the dollar has had a wonderful stretch as it gained nearly 8 per cent since the start of the year.

Rupee depreciation couldn’t be stopped by the RBI’s surprise rate hike last month as a widening current account deficit came to the forefront after the country’s June trade deficit hit a record high.

What Led To The Fall Of The Indian Rupee ?

What added most to the woes of most economies was the geopolitical crisis and uncertainties owing to the Russia-Ukraine war. This came as a big shock for economies coming at a time when they were looking to recover from the slump caused by the pandemic.

Along with the Russia-Ukraine war, high global crude oil prices and soaring inflation have also contributed to the troubles of world economies as the central banks stumble to curb the fall of its currency against the US dollar.

Another major reason leading to the rupee depreciation is the outflow of foreign portfolio capital. Foreign portfolio investors (FPIs) have withdrawn about $14 billion from Indian equity markets in 2022-23 so far.

How Would The Decline Affect You?

The most basic and immediately felt impact would be on the importers who would now be paying more for same quantity and price. Rupee depreciation will simply make importing dearer.

The basket of Indian imports includes crude oil, coal, plastic material, chemicals, electronic goods, vegetable oil, fertiliser, machinery, gold, pearls, precious and semi-precious stones, and iron and steel.

The decline in the value of the rupee would, however, make exports cheaper.

This could also affect the spending choices of households as certain things may become expensive. Moreover, people aiming to study abroad during this time would see an increase in the fees amount.

In terms of remittances (the money that people residing abroad send to their families back home in India), it would cost more as they will end up sending more in terms of rupee.