The Great Fall of Indian Rupee

The Great Fall of Indian Rupee

Amidst the downfall of stocks in a bearish market, the alarming rate of inflation, screaming petrol prices, and the declining value of the rupee are making the headlines.

Leading to this, the experts predicted a "modest depreciation" to a low of Rs 81 in an upcoming couple of months. "A grind higher for USD/INR from here toward 80 in the next couple of months is not a big ask.

Nor do I think ₹80 is a runaway depreciation by any metric. It’s a very modest adjustment of a currency with deteriorating fundamentals,” said Rohan Arora, markets Asia strategist at UBS.

With days passing by, the value of the Indian Rupee is getting weaker and weaker.

Why is the Indian Rupee hitting All Time Low?

The Russia-Ukraine war is among the many causes of this downfall. The war crisis, along with the outflow of foreign investments, dollar efflux from equity and bond markets leading FIIs to pull out their investments, and surging oil prices have also contributed to it.

"As expected, the monetary tightening by the US Fed has triggered a portfolio investment outflow. Till May 16, foreign portfolio investors had pulled out USD 21.2 billion from India. Besides a higher import bill, this has put sudden pressure on the Indian rupee and forex reserve," India Ratings and Research added.

What do People think About this Fall of Indian Rupee?

After hitting 79.40 last week, it kept depreciating. Recently it recorded a low of Rs 79.45. Traders are moving onto safer US assets as the slump continues, raising fear and concern all around.

A surprisingly high jump in the US jobs meant that in spite of India's constant efforts to seal the leak, the downturn continued. The elevated crude oil price is also riding the tide, affecting the economy, trades, and people in general.

We expect India’s widening current account deficit to remain an ongoing drag for INR, with limited offsets from India’s FDI and overseas investment inflows, exacerbated by ongoing FPI outflows,” said Sonal Varma, an economist at Nomura.

Nomura’s expectations chart the fall of the Indian rupee to 82 a dollar by the third quarter of this year. Goldman Sachs has its chart plotted too. The expected trajectory is 80,81 and 81 for 3,6 and 12 months.

We have been a little more bearish than consensus because we think the underlying balance of payments dynamics have deteriorated quite significantly,” said Divya Devesh, head of ASEAN and South Asia forex research at Standard Chartered, Singapore.

Impacts Of Falling Indian Rupee

Inflation, rising petrol prices, and a weakened Indian rupee are all intertwined. One has led to another and has formed a loop, leading to worse outcomes.

The economy is getting a major hit, leading to a rise in prices of daily goods and services and inflation.

India is majorly dependent on its oil imports, and the lower rupee value against the dollar makes the import costlier and indirectly raises the prices of other goods.

Rising petrol prices mean rising cab and transport service costs, increasing prices of daily consumption items, and the chain goes on.

Foreign Education and trips would require some re-do of math because of the weakening rupee.

For a common man, a lower rupee value leading to a rise in prices of everything will impact our savings and plans for future sustenance. Household expenses going up is a significant indication.

The trade imbalance is another consequence of the dwindling rupee value. Exports end up giving away more, and imports suffer by paying more for the same value and quantity.

The market has taken a hit, and there's no mentioning it. Both Nifty and Top-30 stocks have gone down, the Sensex rates have slipped, sovereign bonds declined, and so on.

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