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Pinching pockets: Rs fall to cost you dear

The rupee fell 22 paise to touch a 10-month low of 56.17 per dollar today, due to strong demand for dollars by oil firms. It is just 98 paise short of its record low of 57.15, which it touched on June 22 last year. Sachin Kumar reports. Life of paisa

india Updated: May 29, 2013 21:42 IST
Sachin Kumar

The rupee fell 22 paise to touch a 10-month low of 56.17 per dollar on Wednesday, due to strong demand for dollars by oil firms. It is just 98 paise short of its record low of 57.15, which it touched on June 22 last year.

Experts said the Indian currency may weaken further as a recovery in the US economy and the discontinuation of easy monetary policy in that country may lead to an outflow of funds from India.

A depreciating rupee will make a host of goods and services — from computers and mobile phones, to foreign travel, to foreign studies, among many others — more expensive.

It will also mean that Indian consumers will not get the full benefit of falling global crude prices. Then, the falling rupee will ensure that any rise in crude prices will lead to a steeper increase in pump prices of petrol and diesel.

“The falling rupee will make my studies and stay in the US costlier,” said Sagar Bhanage, 24 years, a resident of Mumbai’s Chembur area, who is going to Cornell University in the US later this year.

His family had budgeted for Rs 25 lakh per annum when the dollar was valued at Rs 53. Now that the rupee is trading at 56.17, their projected expenses have risen by about Rs 1.5 lakh.

The falling rupee is bad news for consumers as well.

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“We are keeping a close watch on the foreign exchange market. If the rupee remains at these levels or depreciates further, we will have no choice but to raise prices,” Rajeev Jain, sales head-home appliances, LG India, told HT.

The outlook doesn't look good in the near term.

“The current weakness in the rupee is driven by global factors. The Indian currency may depreciate in the coming months,” said Indranil Pan, chief economist, Kotak Mahindra Bank.

A widening trade deficit due to high demand for crude oil and gold is also pushing the rupee down.

But the good news is that experts expect the rupee to end the year at 53 to a dollar.