Value of Rupee Depreciating Against the Dollar. How it impacts Indians?
The value of the rupee has been falling against the US dollar for quite some time.
How much has the rupee depreciated? In fact, it reached a record low of 83.2 in rupee depreciation 2022 December 2022. Means one US dollar worth 83.2 Indian rupees. A lot of money. Right!
But Why Is This Happening?
Why is the rupee depreciating in India?. Some of the reasons are:
– Appreciation of the US Dollar:
The US dollar has become stronger due to the fear of global recession and inflation. The US Federal Reserve has also raised its interest rates to fight inflation, which makes the US dollar more attractive for investors.
– Outflow of Foreign Investment:
Many foreign investors have pulled back their money out from India and invested it in the US or other markets. This reduces demand for the rupee and increases the supply of dollars in the market.
– Recession in the EU Market:
The European Union market is facing recession due to issues of Russia and Ukraine war. This reduces trade and investment opportunities for India with EU countries, which also affects the demand and supply of rupees and dollars in the market.
These are some of the Main Reasons why the rupee is depreciating against the dollar:
But How Does This Affect Us as Indians?
-
The increased cost of imports:
As the value of the rupee falls, imports will become more expensive because of we need more rupees to buy the same amount of goods from foreign. This will lead to an increase in the prices of imported goods such as oil, electronics, and machinery.
2. Increased inflation:
The increased cost of imports can lead to higher inflation as business pass on their increased cost to consumers in the form of higher prices.
3. Higher foreign debt:
As the value of the rupee falls, our foreign debt becomes more expensive because we need more rupees to repay the same amount of debt in foreign currency.
4. Reduced investment flows:
The depreciation of the rupee can make India less attractive to foreign investors because their investment will be worth less in their currency. That gives them a reason to invest in other markets rather than India.
Conclusion:
while there are some benefits to a depreciating rupee, such as increased competitiveness for exports, but there are also many negative impacts of dollar-to-rupee value that can affect us like inflation, foreign debt, etc. It is important for us to be aware of these impacts and how they may affect our daily lives.
Thank you for reading this post. I hope you found this informative and useful. Please share your thoughts, opinions, and suggestions in the comments below.
About Author
