Rupee falls to an all-time low of 80 to the dollar, what does this mean for you?
The rupee hit 80 percent against the dollar for the first time on Tuesday after breaking through a series of all-time lows and falling more than 7 percent this year from around 74 percent in early 2022, following a rampant rally in the greenback.
What does this rapid weakening of the rupee mean for you? Here are your 5-point key highlights:
Higher import costs: A weaker currency makes international purchases more expensive as you have to pay more rupees for the same product than before. For example, if you received a foreign product for $1 in January, then you should have paid 74 rupees. But with the Indian currency weakening to 80 to the dollar, you won’t need to pay 80 rupees for the same product. The current trend suggests that foreign commodity prices may rise further due to expectations of further weakening of the rupee.
Higher fuel and energy prices: India imports over 80 percent of its oil requirements, and a weakening currency is driving up the cost of international oil and energy products. This will lead to higher fuel and energy prices for consumers in India as oil refiners and marketing companies pass the additional burden on to the exchange rate. Oil prices rose 2% due to global factors, but 6% more due to a weaker rupee.
Higher Inflation: If the INR depreciates by 5 percent from the baseline (76 to the dollar), inflation could rise by about 20 basis points, while GDP growth could be higher by about 15 basis points through increased net exports , as per RBI monetary policy in April Report.
Pay more for foreign education and international travel: The weakening of the currency will mean that you will now have to pay more for the same foreign education and international travel than before. For example, if the cost of traveling to an international country in January was $1,000, then that turned into 74,000 rupees, but now you will have to pay 80,000 rupees for the same trip. The rupee has weakened more than 7 percent this year against the dollar, suggesting that education and travel in the U.S. have risen 7 percent in the last six months alone.
On the plus side – Indian exports becoming more desirable: A weakening currency is helping exports and making Indian goods competitive in international markets. Exporters who were getting Rs 74 in exchange for $1 worth of product will now get Rs 80 for the same.
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