Essay : How is the falling rupee impacting the Indian economy?

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In the recent circumstances as of July 2022, the rupee continues to tumble and have settled around 80 Rs against US dollar. This descent is expected to go further and will have direct impact on citizens of India.As rupee continues to fall, the CPI inflation will go beyond 6.8 % reported by rating agency Crisil, whereas ideal range for inflation is 2-6% as per RBI. As India being net importer, this would lead to increase in fiscal deficit up to 3% of  total GDP.

Often when the country's currency dips with respect to US dollar, the export products and services become cheaper. So, it is believed to have rise in exports' figure. But in current scenario, the Ukraine-Russia war and post effects of pandemic has weaken the overall demand. The sectors such pharmacy, textile and IT industry which contributes most of the Indian exports may not benefit due to disrupted supply chain and low demand. Moreover, Indian manufactured products which are dependent heavily on imported raw material, will have to increase product prices in order to compensate for inflated raw material prices.

India imports 80% of its total crude oil which is one-fourth of total imports. Increased prices of gasoline and petroleum products like polymers, fertilisers will add further to inflated economy. Increased transportation costs will have impact on each and every section of economy. FMCG products and consumer goods will become more costlier. The other sectors which contributes major portion in imports like machinery and equipment, semiconductor chips may hamper manufacturing productivity and digital growth.

In conclusion, the recent descent in rupee, resulted due to highly inflated economy, will affect Indian citizens badly. Furthermore, exports' figure will not increase significantly due to weak global demand, disrupted supply chains and increased raw material pricing.



References - 

1. Times of India - Explained: What a falling rupee means for India's economy and your finances - Times of India (indiatimes.com)

2.Bloomberg - USD/INR: India’s Forex Reserves Fall to Lowest in More Than 20 Months - Bloomberg  

3. Government of India - Import Export Dashboard

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