Rupee value is continuously floating in the sea storms against foreign currencies since May 2013.
Rupee shows a diversifying fluctuation in its value in span of two days back to back. On Wednesday August 28, 2013, it plunged to its lowest level ever and closed at 68.83 against a dollar. On the very next day rupee witnessed a highest single day gain ever in past 26 years with RBI’s intervention who opened windows for the oil companies by providing them dollar as per their requirement and helped rescue rupee from coming out of its deteriorating situation.
Affect of Rupee fluctuation on various sectors:
Fuel: India mostly imports crude oil and coal, which are the main sources of fuel. Imports become costlier with the decline in rupee value against dollar and vice versa. Oil Marketing Companies (OMCs) are burdened with weakening rupee, as the crude oil purchases are paid in dollar. 80% of India’s total crude requirement is currently imported. Weak rupee results in more investment for the OMCs which therefore results in price increase of crude oil, passing on the burden to its consumers.
India’s coal imports are also increasing with rising demand for thermal coal from power plants in the country. Weak rupee impacts import quantity. Expensive imported material used by power plants may eventually result in higher power tariffs for the consumers.
Food: India imports food materials such as wheat and edible oil from the global market. India’s 60% requirement for edible oil is fulfilled through imports. Rupee devaluation may make the commodity costly in the local market.
Indian Rupee is currently in a very pathetic state. RBI is continuously trying to pull back Rupee to its earlier position but in vain. The Indian currency is on the verge of being denoted as world’s worst currency. The roller coaster ride for the currency continues to impact import and export of the country. It is increasingly becoming difficult to predict future movements. Experts are of opinion that fundamentals in our economy need to improve for situation to normalize and this may take quite some time considering that this is an election year.