How will the weakening of the Rupee impact your life?


In the wake of rising crude oil prices, inflation fears, interest rate hikes, and weak domestic equities, the Indian Rupee reached a new all-time low of 77.78/$ as the Dollar strengthened against major global currencies.

Due to pessimistic global market sentiments, Investors are flocking to safe-haven assets for risk aversion. Since the beginning of the year, the Rupee has been surging. Net capital outflows haven’t helped either. It is noted that Foreign investors have already pulled out around $17.7 billion out of Indian equities this year.

In response, the Reserve Bank of India increased its currency market intervention, stalling the rate of decline. The Indian currency, which has depreciated by around 4% in 2022, came under pressure following the Russian invasion of Ukraine.

How will the weakening of the Rupee impact your life

The depreciating Rupee is likely to have a direct impact on your spending.

Imports: In order to pay for imported goods, importers must buy dollars. The drop in the value of the INR will cause importing goods more expensive. Additionally, other imported items and their components, such as Oil, are also likely to get costlier, which will increase the prices and directly impact the consumers.

Loans: A decline in the value of the Indian Rupee is foreseen to have an indirect impact on loans. As Rupee depreciates, import prices increase, making items and commodities more expensive, resulting in inflation. With rising inflation, RBI resorts to altering the repo rate — which 40 bps have already hiked to 4.40 per cent. The high repo rate reverses the wealth effect and makes banks more cautious about lending. High repo rates cause banks to raise their lending rates, making EMIs costlier. Both inflation and repo rates move in the same direction. The interest rate is increased to stabilize inflation. High-interest rates will make borrowing more expensive, preventing consumers and businesses from spending on big-ticket goods. In short, it will limit the amount of money available for the purchase of riskier assets.

Medicines: From GlaxoSmithKline to Novartis to Pfizer, some of the most well-known and recognized names in India’s medical industry are not Indian. Their drugs are imported from other countries, and no Indian manufacturer has a viable alternative. These firms’ medications get more expensive as the dollar climbs. You’ll have to pay for them anyway if they become more expensive. You can’t stop them for a time or move to another option in some essential instance.

Cars: Importing automobiles from car manufacturers, namely Tesla, Hyundai, Toyota, and Honda, has gotten more expensive. Even Maruti Suzuki in India relies on imports to run its business. As a result, if the Dollar rises, your dream new car will become more expensive.

Smartphones and other electronics: Unlike in Japan or China, most smartphones are not manufactured in India. And even the ones that are manufactured in our country rely on components imported from other countries. So it’s usually the wrong time to buy your next shiny gadget if the Dollar is rising. And yes, this is true for other electronic items too!

Jobs and Remuneration: If the rising costs of things mentioned above aren’t enough, some people may see their paychecks shrink. Leave shrinking. In worst-case scenarios, wages may disappear altogether. As said above, businesses based on imports must cut their costs when the Dollar rises. So one way is to control the money being spent on human resources.

Foreign education: Foreign schooling would become more expensive as the Rupee loses value against the US dollar. As the Rupee depreciates, one will have to provide more rupees for each Dollar. Students studying abroad or wanting to relocate to another country may need to adjust their finances.

Foreign travel: With summer vacations looming and the international borders opening their doors after two years, travellers across the globe are expected to be able to go abroad and travel without worrying about COVID-19. However, Looking at the spike in INR/USD, consumers expecting and planning vacations overseas will have to spend more than earlier expenses. His is plain and straightforward — rising fuel prices will increase operating costs for airlines, which they’ll obtain from flyers like you in the end. Plus, if you plan a trip abroad, especially somewhere in the US, you’ll have to convert more Indian currency into US dollars. However, don’t worry if you booked your holiday package in advance before the Rupee fell. That package is safe.