Falling rupee burdens importers, students in foreign universities

The falling rupee hurts credibility and slows investment, it gives a fillip to inflationary conditions at the macro level and is a burden on wallets at the micro level.
Image used for representational purposes only. (Express Illustrations)
Image used for representational purposes only. (Express Illustrations)

BENGALURU: The falling rupee hurts credibility and slows investment, it gives a fillip to inflationary conditions at the macro level and is a burden on wallets at the micro level. Businessmen complain that it hurts their margins. Shailesh Mehta, who imports medical equipment, said, “The selling price is fixed with the government because of tenders and lock-in specifications, and we cannot go back on our commitment.

The huge difference is a burden and there is no safety clause. Add GST and the burden works out in the range of 14-15 per cent.’’ Mehta, who is into the paper importing business too, said paper rates have jumped 40-50 per cent, which is a burden. Export businessman Rajesh Shah said the picture is none too rosy for exporters either. “Exporters should be very happy with the depreciating rupee because we receive more rupees for the same USD pricing of our products. Ironically, we are also facing issues due to high input costs of imported raw materials, due to which our products are not competitive, and our overseas customers don’t want to pay higher prices.’’

Santosh Neelangatil, whose daughter studies abroad, says the cost of education is spiralling. “It’s a challenge, the steep fall in the rupee has forced us to rework our financials with a compromise in other investments and domestic expenditure,” he said, and quipped that the rupee dips most when his daughter’s semester payment is due. “It has affected the export-import business. Import content of most exporters is about 50 per cent, so due to depreciation, the exporter loses out,” said National Executive Committee member of FKCCI and Assocham J Crasta. “The RBI has already pumped in $350 billion, but the rupee is losing ground and is a big worry for exporters.”

Economist and former National Finance Commission member Prof Govinda Rao said that most emerging market economies are facing sharp depreciation in exchange rates due to steep increase in the Fed interest rate. Until the Fed stops the hike cycle, currencies of most emerging economies, including India, will depreciate, causing increase in import cost and pressure on prices, he said. “Global inflationary forces and petro product prices are the major reasons behind the falling rupee. RBI is taking steps to restrain the fall, but these are ineffective as Indian consumption of petroleum products and imports continues at a faster rate. The fall is inevitable, given our unabated consumerism,’’ former ISEC chairman Prof R S Deshpande said.

This free fall is hurting importers as well as Indian students studying abroad, said Prof Sankarshan Basu of IIM-B. “There is no idea about the bottom-out level of the rupee. It could have serious implications, both in the business and personal space, as exports and remittances do not necessarily match the fall. This might even lead to huge additional and unplanned liabilities, causing bigger damage to the domestic economy,’’ he said.

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