Be prepared for another round of oil price hikes, besides paying more for vacations overseas and studying abroad. The reason: the rupee fell to its lowest level against the dollar in the past 32 months on Wednesday.
The rupee, which sank to 51 to a dollar, is not far from its all-time low of 52.17 to the dollar recorded in March 2009.
The downtrend means imports will be costlier and as India imports more than 70% of its petroleum requirements, this means that Tuesday’s Rs 2.22 cut in petrol prices will not only have to be reversed, but prices may shoot up further if the policy of deregulation is maintained by the government.
And costlier petroleum products will have a cascading effect on prices of virtually all commodities — from essentials to luxury products, which require transportation.
With analysts not foreseeing a rupee revival in the near future, the only short-term hope is an intervention by the government.
As finance minister Pranab Mukherjee said, “The RBI is watching the situation. As and when it is necessary, they will intervene.”
Till, then, it’s best to brace ourselves for tough times ahead.