Dollar Vs Rupees: Rupee breaks 42 paise, the dollar crosses 80 rupees, know what is the story behind it?

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Dollar Vs Rupees: Rupee breaks 42 paise, the dollar crosses 80 rupees, know what is the story behind it?


Photo:India TV Dollar crosses Rs 80 after breaking 42 paise

Highlights

  • Rupee has been depreciating since independence
  • Indian rupee has fallen to 80.48 against a dollar
  • The US Fed on Wednesday raised interest rates by 0.75 per cent as expected

Dollar Vs Rupees: US Fed On Wednesday, the company has hiked interest rates by 0.75 per cent as expected. Its effect is being seen from the Indian stock market to the rupee. The rupee has depreciated by a record 42 paise in early trade on Thursday. The Indian rupee has fallen to 80.48 against a dollar. This is the lowest level of Rs. Due to the fall in the rupee, on one hand the trade deficit will increase and on the other hand the price of essential goods will increase. Its two-pronged burden will fall from the government to the common man. I know why the rupee is falling and what will be its effect on the Indian economy?

why rupee is falling

Another reason for the decline is also being told that the dollar index continues to rise. Under this index, the performance of US Dollar is seen against the major currencies of the world like Pound, Euro, Rupee, Yen. A top of the index means the dollar strengthens against all currencies. In such a situation, the rest of the currencies fall against the dollar. This is the reason that not only the rupee but also the euro has fallen in front of the dollar.

The third reason for the fall of the rupee is believed to be the Ukraine war. The war has reduced supplies and increased prices of products such as oil, wheat, fertilizers, which Russia and Ukraine are major exporters of. Since India is a major importer of crude oil in particular, the country’s expenditure on imports has increased tremendously. The payment for imports is done in dollars, due to which there is a shortage of dollars within the country and the value of the dollar goes up.

How far can the rupee break?

According to Bank of America, the Indian rupee can break to 81 per dollar by the end of the year. The Indian rupee has depreciated more than 9% so far this year. The strengthening of the dollar and the rise in crude oil prices have worked to weaken the rupee. India imports about 80% of its crude oil requirement. This has put pressure on the rupee.

What will be the effect of weakness in rupee

India imports everything from oil to essential electric goods and machinery along with other gadgets including mobile-laptops. Due to the weakening of the rupee, the import of these items has to pay a higher amount. Due to this the price of these items is increasing in the Indian market. India buys 80 per cent of its crude oil requirement from abroad. It is also paid in dollars and due to the cost of dollars, the rupee will cost more. Due to this, freight will be expensive, due to its effect, inflation will be hit further on everything needed.

direct impact on Rs.

The widening trade deficit has a direct impact on the current account deficit (CAD) and affects the belligerence of the Indian rupee, investor sentiments and macroeconomic stability. The CAD is expected to reach three per cent of GDP or $105 billion in the current fiscal. The deteriorating import-export balance is due to the rise in global oil and commodity prices due to the Russia-Ukraine war, supply chain disruptions due to Kovid restrictions in China and increased demand for imports. Another reason for this is the windfall tax imposed on export of diesel and aircraft fuel from July 1.

The decline in the country’s exports comes at a time when the oil import bill is increasing. India has spent around $99 billion on oil imports between April and August, which is much higher than the $62 billion spent in the same period of 2020-21. The government has taken a number of steps in recent months to discourage imports, such as raising import duties on commodities like gold, banning imports of many items and making efforts to increase the share of ethanol blended fuels in domestic use. These measures have yielded some gains and some moderation in the import bill, but a major change in the broader trend is unlikely.

Rupee has been depreciating since independence

India got independence on 15 August 1947. At that time a dollar was worth one rupee, but when India became independent, it did not have enough money to run the economy. Prime Minister of the country at that time Pandit Jawaharlal Nehru Were. The government led by him decided to reduce the value of the rupee to increase foreign trade. Then for the first time a dollar was priced at Rs 4.76.

The economic slowdown for the first time broke the back of the rupee

For the first time since the country’s independence, there was a recession in 1991. Then there was the government of Narasimha Rao at the center. Under his leadership economic liberalization was initiated, which broke the back of Rs. With a record fall, the rupee touched 22.74 per dollar. After two years, the rupee weakened again. Then a dollar used to be worth Rs 30.49. Since then, the trend of depreciation of the rupee has been going on. From 1994 to 1997, there was a fluctuating price of rupee. During that time the rupee remained in the range of Rs 31.37 to Rs 36.31 against the dollar.

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