We will explore the recent decline of the Indian Rupee (INR) and its impact on your finances.

In the news

The Indian Rupee (INR) recently hit a record low against the US Dollar (USD), with 1 USD now worth 84.1 INR. Let’s understand why the INR is weakening and what it could mean for you.

Two reasons the INR is falling

1. Rising Crude Oil Prices:
Crude oil prices have increased by over 10% in the last few weeks. As oil prices rise, we need more USD to pay for these imports, increasing demand for USD and putting pressure on the INR.

2. Foreign Fund Outflows:
In the past 30 days, foreign investors sold ₹60,601 crores worth of Indian shares, shifting to a ‘Sell India, Buy China’ strategy. This reduces demand for the INR, leading to further depreciation.

Does it mean it’s all negative for India? Not exactly.

The changes in the INR’s value have both positive and negative effects, depending on which part of the economy you’re looking at.

The Good

1. Boost for exporters:
A weaker INR makes Indian goods and services more affordable for global buyers, potentially driving up demand in export-oriented sectors like IT, pharmaceuticals, and textiles.

2. Increased Competitiveness of Domestic Goods:
Imported products become pricier because we need to pay more for imports. Indian-made goods become more attractive to local consumers, supporting domestic manufacturers.

3. High remittances:
Remittances in foreign currencies convert into more rupees, benefiting recipients in India by providing them with a higher amount for every dollar, euro, or other currency sent.

While a weaker rupee can cause concern, it’s not all bad news. On the flip side, it can bring challenges that directly affect consumers and companies.

The Bad

1. Higher Costs for Companies:
Sectors relying on imported raw materials, such as automobiles and chemicals, face increased costs, reducing profit margins and driving up prices for consumers.

2. Reduced Foreign Investments:
Depreciating domestic currency offsets the gains in the stock market for foreign investors. It makes India less appealing to foreign investors, resulting in reduced capital inflows.

3. Costlier Foreign Travel and Education:
A weaker rupee means higher expenses for travel and education abroad, affecting those planning trips or studies overseas.

To conclude

You see, it’s not black and white at all, but somewhere in between. It’s a double-edged sword—while it boosts export-driven sectors, it also raises the cost of living through higher import prices and inflation.