Why Rupee is falling against dollar ?
Rupee Falling against dollar. What it really means to us ? Does it makes any difference to us even if we don’t deal in dollars ? What are the reasons for this fall ? What are its adverse effects ? Can we do something about it ? Here we answer all these questions .
Rupee falls by 1 against dollar..What it means ?
It simply means that if earlier we had to pay 49 for a dollar, now we ll have to pay 50 for the same.In simple words, loss of 1 against every $1 transaction with fall of every rupee against dollar. So, if we buy a thing worth say , $1000 , then earlier we had to pay 49000 and now we have to pay 50000.So,1000 loss in just 1 day !
Why Rupee falling against Dollar ?
|Well, there are many reasons for it….
- India’s imports are increasing and exports are decreasing due to large population.That simply means that much more dollars are being spent , as compared to their earnings.Again a big factor for declining dollars.
- Restricted FDI policies.There are many sectors in which FDI is restricted such as retail, insurance, defence etc. Records show that our FDI inflows fell from $40billion (2008) to $25billion (2011).Due to relaxed FDI policies in China, FDI inflows in China are always above $100billion mark.
Impact on Indian Market :
- Companies with foriegn debt would have to pay more for same debt.
- Oil companies would pay more for lesser valued barrel.About 70% of oil needs of India is imported.And if we go on paying more for unending oil needs, it would adversely affect indian market and increase inflation.
- With each international transaction, India is suffering mammoth losses.Till now , we have seen a very small scale losses with falling rupee.But, international trades are in values of lakhs of crores.With every falling rupee, India is in loss of hundreds of crores.
Just a small example.In 1947, $1 was equivalent to *1. So, for a transaction worth 5lakh crores, we had to pay 5lakh crores.Now, the rate is say, *50 per dollar. So, now for the same purchase worth 5 lakh crore, we have to pay 250 Lakh crore. Just Imagine !!!
Is anybody Gaining out of falling rupee?
Currency exchange rate does not determine the size of the economy .It is depended on the demand-supply dynamics of the market.