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How US Dollar exchange rate impacts the Indian Economy

Press release   •   Nov 01, 2018 14:04 IST

Presently, the value of INR compared to US dollar is hanging in between 70–73, which is at its lowest

point ever since. Industry experts have been predicting that Indian rupee value likely to depreciate

further in the near future. If you ask anybody the very reason behind the incessantly falling value of

rupees compared to US dollar, all you would hear is “increasing prices of crude oil prices in international

market”, which is not incorrect. As per industry expert, it is one of the prime reason behind all these.

One of the biggest downside of falling value of Indian Rupees is it makes import activities more costly.

Oil is considered to be the backbone of all industrial activities, as transportation and shipment is

dependent on it. After the U.S. and China, India is the third largest importer of the oil in the

international market. It is said that, India imports around 70 to 80 percentage of the oil from

international market.The changes in the price of the crude oil in the international market has upset

India’s current account deficit. Due to this, India’s account deficit has reached to nearly USD 158 to 160

billion. The rising oil rates and falling of Indian currency prices is expected to affect the health of current

account deficit more badly. With addition to this, it will elevate the price of vegetables, groceries, and

FMCG products, as the transportation prices will go up.

The two major economies of the globe “the U.S.” and “China” are indulged in trade war to present their

strength in the international market. To sum up the current situation, investor are on edge due to

ongoing trade war between these largest economies, which is expected to unease the capital outflow.

The blockage in the investor money, in turn, slow down the market activities in the Indian market.

Falling rate of the Indian rupees has upset the common as well as business man. If we talk about the

common man, they are facing the rise in the price of vegetables (food), groceries item, and other

consumer products, as it all depends upon the oil price used in the transportation of these goods. On

the other hand, business person will face the problems in money flow in the market and scarcity of

investor in the market.

Unlike import, export industries will get benefit out of it. The down fall of the Indian rupee is likely to be

favorable for export industries. Some of the sectors like IT (information technology) and Pharma

industries is expected to gain revenue from the falling of the Indian rupees, as most of the revenues

generated by them comes from the outsiders i.e. international markets.

Not only in India, increasing price of the US dollar has negatively affected the other developing

countries. When rate of the U.S. dollar exchange increases, both trade &investment activities collapses

as dollar funding gets more expensive for government and corporate businesses. Furthermore, in case

of exporters of commodity, inflows of dollars slows down as the price of their exports falls in dollar

terms. Fordeveloping countries other than India, a rising U.S. dollar exchange rate rings slow GDP

growth and slow international trade. In some cases, developing countries often cut down their trading

activities, as they find themselves unable to obtain the dollar they need for business due to higher

exchange rate of dollar.

Some facts related to changes in the Indian Rupee.

 2014 – INR 58

 2015 - INR 63

 2016 - INR 66

 2017 - INR 64

 2018 - INR 69 – 73