Rupee's deadly dive — where will it hurt the most?
The rupee is at its miserable self again. The movement in rupee is taking a turn for the worst. As the economy braces itself to tackle onslaught from foreign markets, staggering demand for the dollar and encircled with market volatility, the fall in the Indian currency couldn’t have come at a better time (sarcasm).
The apparent slump isn’t singular to the stock market and the corporate world. The common man too has quite a considerable chunk in the woes that come in the aftermath of rupee’s ugly downfall.
It is time to make a list of all those things which you may have to overlook or work hard and pay for this year.
For starters, loosen up the pockets for all the fancy new gadgets you were saving for. Cheese burst and thin crust pizza could be replaced by paranthas. You may also need to let go of the idea of putting that stereo system into that new car you’ve been planning for some time. Those who are looking to spend some quality time with their loved ones on a foreign trip, even a honeymoon, forget Paris, try Manali or Goa instead. And students who have applied for a loan to study at swanky foreign universities, you might have to chip in doing overtime at the grocery store or at the side street bar.
High inflation could add more misery to an already tightened wallet. The weakened rupee has resulted in increased prices of crude oil, medicines, and fertilisers and so on. Take for instance crude palm oil. It is very much responsible for setting the benchmark for other edible oils. India imports a considerable chunk (50 percent) of its edible oil mostly from Malaysia and Indonesia. Any increase on import on crude palm oil will result in mounting pressure on an already high inflation.
Next up, crude oil. India depends upon imports for a major portion of crude oil it consumes. About 70 percent of it is imported from the gulf. With the rupee encumbered by international demand for the dollar, crude oil prices can skyrocket.
Fuel has a major role to play in the price of food as well, since cost of transportation is directly connected to it. Transported goods from one country to another will also result in the rise in price of various food items. Soaps and shampoos, deodorants and perfumes, detergents other fast moving consumer goods could be charged more.
The gradual decline in rupee will come as bad news for interested Indians flocking to foreign abodes on vacation. With the rupee bowing to foreign pressure, finding R&R on trips could be short lived.
Air fares could go up, owing to the fuel surcharge. Shopping could become costlier, not to mention the stay will see an increase too. City tours, local cuisines and generally eating out can be heavy on the billfold.
While many travellers plan their vacation way in advance, especially the ones heading for foreign shores, those who want a quick getaway might have to look inland, like Goa, Manali and Simla, for spending their well-earned rest. Closer destinations like the Andaman and Nicobar Islands, Maldives and so on may feel like a better spot to rest one’s head. Tourists could also try and avoid non-dollar vacation spots and rely on places like Thailand, Malaysia in south-east Asia or may even head over to Dubai and Doha.
Students who find opportunities to go study at international universities have to rely on education loans, or a fat family purse, to pursue their desired course.
With the rupee hovering in the 60s, many students will now find it difficult to sustain more completely than they were able to when the rupee figured in the 50-level category. Many students who have taken up education loans will have to bear the brunt of a depreciating rupee. While the loan is taken in rupees, the expenses are borne in dollar or the currency of the country, thereby overhauling the education and stay altogether.
Depending on the exchange rate, increase in one rupee could result in lakhs for a student.
Therefore, USD 100,000 for a student which would a month or two ago cost 55-58 lakhs could go up as much as by Rs 62-64 lakhs.
In times like these, individuals studying in foreign universities have no other option but to work part time or ask their respective banks to increase their loan amount. The onus of gathering more funds is greatly borne by students when the rupee takes a divebomb!
The automobiles industry has been quivering due to lack of sales in these past few months. It has been declining at a steady rate, impacted by a nose-diving rupee.
That has not deterred adamant car buyers to look the other way. In fact, those who wish to buy a new vehicle book it way in advance. But there are some factors that result in the slowing down of the auto sector in the country.
Primarily, cost of imported components will have to be handled by the industry due to the free fall in rupee.
Imported cars sold in India are bought in Indian rupees at a rate far exceeding the original price. Judging by the slot the rupee has on the foreign market, these luxury rides will carry a hefty price tag.
Car makers will have to increase rates on their vehicles to protect margins. Increase may come from the country’s biggest car maker Maruti Suzuki to foreign brands like Volkswagen, Toyota, and Honda and many others.
Electronics and Entertainment
Consumer durables, like imported laptops, tablets, HD TVs and mobile phones which have imported complements embedded will be become more expensive. Those who look towards foreign markets to purchase their electronics have to come to terms with the dive that the rupee has taken. For instance, the much-awaited entertainment systems, Sony Playstation 4 an Xbox One, priced at USD 399 and USD 499 will cost more than Rs 30,000 due to the price sensitive nature of the Indian currency.
Avid readers will find it difficult to pay for imported paperback as the cost of these books, as well as the cost of sourcing will go up.
International food chains will also have to put up with the plunge that the rupee has taken.