I was 19 years old. My father took us to our first ever international trip to Dubai. Dirham is the official currency of Dubai. At that time, Dirham was equivalent to 18 INR. Being born and brought up in a traditional Marwadi Baniya family, the calculations are something which have now become a part of the subconscious brain. Though my parents have always been very kind and generous and never bothered me for any purchase that I ever wanted to make, but in Dubai the soul of a calculative baniya kid didn’t allow him to go freehand. Somewhere, I was feeling dejected to pay extra money to these people. Ideally why should I. My parents worked as hard as theirs but in order to purchase any commodity in their country, I had to pay 18 times more. (I didn’t understand purchasing price parity, back then)
Now that I have started earning on my own, certainly a foreign trip looks like an expensive affair to have. Rupee has hit an all time low against the dollar of 79.03. Goodbye US trip!!
But why is this happening ?
The value of the Indian rupee to the US Dollar works on a demand and supply basis. If there is a higher demand for the US Dollar, the value of the Indian rupee depreciates and vice-versa.
If a country imports more than it exports, then the demand for the dollar will be higher than the supply and the domestic currency like Rupee in India will depreciate against the dollar.
Supply Chain disruptions, owing to the Russia Ukraine War, inflation, widening trade deficit and high crude oil prices have put India and Indian currency in a soup.
Double whammy has been the heavy foreign outflows from the domestic market s the foreign institutional investors (FIIs) have sold shares worth $28.4 billion so far this year, outstripping the $11.8-billion sell-off seen during the Global Financial Crisis of 2008. The rupee has depreciated 5.9 per cent versus the dollar so far this calendar year.
With more and more money flowing out of the Indian economy, Indian Rupee depreciates against other currency in the world. ‘Because of this depreciation of currency, it makes imports even more costlier and hence we are suffering record inflation in the country right now
The Reserve Bank of India (RBI) is fighting on several fronts to slow the rupee’s decline to fresh records. The central bank is said to have sold dollars at 78.97-78.98 per US dollar on Wednesday and has heavily expanded its foreign exchange reserves to shield the rupee from a runaway depreciation.
Is it only in India whose currency is weakening?
No, its not. Infact in south east Asia, we have done well compared to other currencies. However, the impact of the fall can be felt everywhere. Till the time inflation doesn’t calm down and market revival doesn’t begin again, we don’t see India’s story to improve very soon!
