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Measures taken to stem Indian rupee fall: P Chidambaram,Rupee's free fall: How it will impact you,Indian Rupee,Rupee Fall,Rupee 2013,Rupee Today,Chidambaram Said,Current Account Deficit,CAD,FII Inflows,Business News, Indian rupee,Rupee's free fall,Rupee e

Measures taken to stem Indian rupee fall: P Chidambaram,Rupee's free fall: How it will impact you,Indian Rupee,Rupee Fall,Rupee 2013,Rupee Today,Chidambaram Said,Current Account Deficit,CAD,FII Inflows,Business News, Indian rupee,Rupee's free fall,Rupee exchange rate,Rupee Vs dollar

Government has taken a number of steps to stem the depreciation of Indian rupee including moderation in demand of non-essential imports and enhancing supply of capital flows, Finance Minister P Chidambaram said.

"A number of steps have been taken to moderate demand of non-essential imports on April 12, 2013, enhance capital flows to augment supply of foreign exchange and curb speculation in the foreign exchange market to stem the rupee depreciation," Chidambaram said in a written reply to Lok Sabha on Tuesday.

He said fall in value of rupee in the recent period is due to supply-demand imbalance in domestic foreign exchange market on account of elevated levels of current account deficit (CAD) and volatility in capital flows, particularly FII inflows.

Indian rupee breached the 64-mark against dollar intra-day by falling 98 paise to trade at record low of 64.11 on Tuesday on the back of strong dollar demand.

Chidambaram said the impact of rupee depreciation on domestic consumers is mitigated to a large extent on the back of substantial subsidy outgo on imported items such as diesel, LPG, kerosene, fertiliser.

Also, headline inflation based on wholesale price index (WPI) has been at moderate levels in recent months at 4.86 per cent in June, he added.

In reply to a question on economy, he said several steps have been taken to revive economic growth including speeding up of infrastructure projects, enhancement of credit to infrastructure companies and strengthening of financial and banking sectors.

Besides, liberalised FDI norms in several sectors including telecom, deregulation of sugar sector, launch of inflation indexed bonds, fiscal consolidation through reforms and reduction in subsidy of diesel, cap on the number of subsidised LPG cylinders and new gas pricing guidelines are other measures, he said.

Moving from bad to worse, the Indian rupee hit new historic low of 64.13 against the US dollar in intraday trade Tuesday on sluggish local stocks and continued dollar demand from importers.

Deutsche Bank has said in a note that the rupee may slide to 70 to the dollar in a month or so, although some revival is expected by the end of the year.

To restrict the outflow of foreign currency, RBI had, however, on August 14 announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians.

Strong demand of US currency from importers and banks, continuous capital outflows, widening current account deficit and dollar's strength against other currencies overseas amid expectation that the Federal Reserve will soon taper its bond-buying programme has put pressure on the rupee.

Whether the currency would find its stable level or will continue to slide further remains a tricky question. But till the currency settles itself, let’s have a look at how continuous depreciation of the Indian currency will affect the common man.

Rupee's free fall: How it will impact you

Importers/Exporters

Importers will strongly feel the pinch of falling rupee as they will be forced to pay more rupees on importing products. Conversely, a feeble rupee will bring delight to the exporters as goods exported abroad will fetch dollars which in return will translate into more rupees. Also, a weak rupee will make Indian produce more competitive in global markets which will be fruitful for India's exports.

Imported goods: Buying imported stuff will become a very costly affair. You will have to shell out extra on imported goods. For instance if you bought a product valued USD 1, you paid around Rs 54 (weeks ago) but you will now have to shell out close to Rs 63 for the same product.

Fuel price: A weak rupee will increase the burden of Oil Marketing Companies (OMCs) and this will surely be passed on to the consumers as the companies are allowed to do so following deregulation of petrol and partial deregulation of diesel. If the OMCs increase fuel prices, there will be a substantial increase in overall cost of transportation which will stoke up inflation.

RBI’s monetary policy: If the depreciation in rupee continues, it will further increase inflation. In such a situation RBI will have very less room to cut policy rates. No cut in policy rate will add to the borrower’s woes who are eagerly waiting to get rid of the high loan regime.

Students studying abroad: Students who are studying abroad will bear the brunt most owing to depreciating rupee. Expenses incurred towards the university/college fee as well as that of living will shoot up, thereby spelling a huge burden on the students.

Tourism: The depreciating rupee will surely be a dampener if you are planning your holiday abroad. Your travel charges as well as hotel charges will escalate drastically, let alone shopping and other miscellaneous spending activity.

Overseas Indians: Money saved is money earned. Depreciation of rupee is certainly a good news for the overseas Indians. Those working abroad can gain more on remitting money to their homeland.

Country’s fiscal health: A frail rupee will add fuel to the rising import bill of the country and thereby increasing its current account deficit (CAD). A widening CAD is bound to pose a threat to the growth of overall economy.

Source: Economic times, Zeenews

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