The rupee has fallen to its new record low on Friday at 79.12 as the market closed.
Weakening of rupee has long-standing impact, to assess the impact of the falling rupee, Zee Business brings you this report
The rupee falling has been linked to many things. The prominent reason among them is the global recession. As the whole world faces slow growth and high inflation, the Indian economy is not isolated.
The global recession has impacted the Indian economy and we see that the rupee has been falling continuously.
The persistent inflation also has a role to play as the same goods and services now cost more while income remains the same.
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Apart from that, Interest rate by FEDs has led to more pulling of global currency in dollars. Furthermore, the geopolitical crisis pertaining to Ukraine and Russia has impacted the global supply chains; leading to worldwide shortages of many raw materials and rate hikes.
Also, increase in crude oil prices has dealt a blow to india’s forex reserves as India imports close to 80 per cent of its crude oil requirements.
Apart from crude oil, India also imports 60 per cent of its oil that is used in the households. Thus, the price rise hurts consumers.
The Indian consumer loves to hold physical gold and thus close to 98 per cent of the gold in India has to be imported from the outside.
Subsequently, Foreign Institutional Investors (FIIs) have been pulling money out of the Indian market leading to further dip in share market.
When all of these things come together bring a decrease in rupee value.
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However, we must note that while the weakening of the rupee hurts imports; our exports benefit from the weakened rupee as they get more money at rupee-dollar exchange.
Hence, export oriented industries such as IT, Pharmaceuticals, and Textiles earn more.
Lastly, we must note that global trade is done in Dollars, hence India requires forex reserves to complete the trades smoothly.