THE SPILLOVERS OF DEPRECIATING RUPEE...

CONCEPTUAL BACKGROUND• Currency Depreciation is the loss of value of a

country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system.

• ‘Devaluation’ means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency.

THE JOURNEY OF INDIAN RUPEE

• 15th Aug Indian rupee was linked to the British pound and its value was at par with the American dollar.

• at 4.79 against a dollar between 1948 and 1966.• The rupee's link with the British currency was

broken in 1971 and it was linked directly to the US dollar

• The rupee's link with the British currency was broken in 1971 and it was linked directly to the US dollar

• 1993- exchange rate was freed to be determined by the market. 1993 rupee stood 31.37 against a dollar.

• The rupee traded in the range of 40-50 between 2000-2010. It was mostly at around 45 against a dollar. It touched a high of 39 in 2007.

• The Indian currency was 61.80 against a dollar Aug 6.and it slumped to a record near 69 to the dollar on 28th Aug 2013.

SECTOR IMPACT

Jobs and Remuneration

Pay cheque may shrink due to increase in cost of production and operations.

It is a good time for industries which earn in dollars.

Automobile sector

Input costs have raised .

Many have foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds.

more or less all auto companies will have to increase prices.

Entertainment industry

The imported paperback, pizza and the latest laptop will also become more expensive.

Electronic consumer goods , with imported components will also become costlier.

burden of high prices will be forced to pass on to customers

Importers/Exporter

Importers will be forced to pay more rupees on importing products. Goods exported abroad will fetch dollars which in return will translate into

more rupees.

Tourism Dampening effect on tour abroad, Travel and Hotel charges escalate drastically

Studies abroad

Expenses incurred towards the university/college fee as well as that of living will shoot up.

Impact on Industry

Export-oriented industries would post gains in forex earnings. 

IT 

Expected to boost software sales and forex gains in coming months.

Remittances, travel expenses and dividends could increase outflows.

Real Estate

NRI to invest in Indian real estate in order to later enjoy the appreciation of properties.

Rising cost and delivery time of the real estate projects.

negative impact on the real estate sector.

Textiles textile industry is expected to gain in the current forex environment.

Gems and Jewellary

The sector is export-oriented and is expected to gain against the rupee depreciation trend.

Ferrous metals

Steep rise in prices of coking coal and iron ore aggravated by adverse rupee movements is expected to continue to pressure raw material costs for this industry and allied segments.

Power  Thermal power plants are expected to face higher import costs of ferrous metals and petroleum products, which in turn are expected to remain firm in the near future.

Fertilizers  Raw material expenses rose sharply by nearly 20% against elevated global prices and depreciation in rupee.

Potassium chloride witnesses a decline in the imports. This trend is likely to continue in the coming months along with a decline in sales.

Pharmaceuticals 

Companies are exporters and stand to gains through higher export . Losses on external commercial borrowings (ECBs) and limited feasibility

of conversion on foreign currency convertible bonds (FCCBs) pose a concern to these companies, but are not expected to be huge.

MEASURES by RBI

MEASURES by Government

Power of Common Man!

CONCLUSION