Rupee Hitting A New Low
- The Rupee has breached the Psychological 70-mark for the first time against dollar hitting a new low of 70.08 in intra-day trading.
- It is followed by a global currency crisis after the Turkish ‘Lira” was battered.
- The Rupee closed worst Performing Asian as the contagion from the collapse of the Turkish ‘Lira’ spread to emerging markets.
- The Government has said that external factors like deteriorating Turkish national Currency ‘Lira’ has cascading effect.
- The Prices of Crude Oil is started increasing and the U.S.A has started Pressurising her allies that stop trade from Iran. This in turn will create a demand for dollar making it more stronger.
- The Global Trade war between china and U.S.A is also a cause of weakening rupee.
- The Devaluation of Chinese currency ‘Yuan” for the last few decades has triggered dollar flight from emerging economics like India.
Scenario of the Indian Rupee against other Currencies:
Past 5 years:
|Foreign Currency||Rate of Change of Indian Currency|
- Rupee has fared wall against other basket of currency but has fared poor against dollar.
- So, we need to analyse why we are increasing trade in dollar and we should also look into imports like Gold, Crude oil which in turn makes rupee weak.
Most of the Reserves in RBI are borrowed and increases the interest rate
- As a result of weak rupee, experts must increase. This remains only in theory because the IT, ITES, Pharmaceutical sector which is suppose to fair good has not done well.
- This is because, the Contractors with these companies renegotiate so that the profit remains stable.
Effects of weak rupee:
- A Weak Rupee makes overseas life from travel to Education, Tourism, Business costlier.
- Imported Goods like Crude oil, electronics, Gadgets becomes more expensive consequently the prices of petrol and diesel goes up.
- This makes living costlier from transport a logistics, to other items as it creates inflationary effect.
- As a result to control inflation, RBI will increase lending rates and from home loan to car loan to EMI everything gets costlier.
- Ensure Frequent flow of FDI and FPI into the country.
- Lensing the burden of Crude oil import and gold and trade diversification.
- Attracting Pension funds from developed economy and during good in case of doing business.