Rupee vs Dollar: Inside the Fall

A few of our friends are studying in the US and in Europe and once while we were having a short conversation about life there. We asked them curiously about how they have been managing their finances, especially when the Rupee is on a free fall? 

‍

Their answer was quite exactly what we expected - It was hard for them to manage as the current exchange rate made them put more rupees to get the same dollar. 

‍

But is it only they who are at a disadvantage due to this surge in demand for dollars? 

Nope, we all are. 

‍

You may not realize it but, it is as much important for you to understand the implications of the fall of the rupee as it is for someone who travels or studies abroad. 

‍

Let's take a ride. 

‍

The rupee is a weaker currency as compared to the dollar. Currently (during May 2022) a dollar is equivalent to ~ Rs. 78 and only last year it was Rs.72. This means in just one year the rupee fell by 8%. 

The decreasing rupee is a headache for each one of us.

‍

Let's understand how : 

‍

1. Expensive Imports: Whenever the rupee falls, the import becomes expensive. Why? Because imports are paid in Dollars and to have the same dollar, we will need more rupees. Just take a look around you. You may find a TV, fridge, ac, cars, bike, petrol, etc. Is there anything that can be created without an imported component? No right? 

This means, that when the rupee gets weaker, import inflation gets powered, which also affects us.

‍

2. Costlier Loans: It's rather an indirect impact. Due to the fall in rupee, import costs increase, and due to this we also see a rise in inflation. But with the rising inflation RBI resorts to increasing the bank rate ( as a monetary policy measure), which in turn leads to altering of interest rates by the banks on loans. And, thus the loans that we take for auto, home, or personal uses get expensive. 

‍

3. Stock Prices: Rupee depreciation is also the effect of Foreign Investors pulling out money from the Indian Equity Market. Due to this we often see a sharp fall in the equity space, resulting in a decline in the value of your investments in Mutual funds and stocks.

‍

4. Foreign education and Travel: Everyone looking out to go for an education/ trip abroad will need to revise their budgets. Because due to the fall, every dollar requirement will need to be funded by more and more rupees.

‍

We hope it helps you by being informed about the recent changes happening across the economy. And we believe you will make wise decisions around money. 

‍

For decisions around money, do consider Zerobalance as your go-to app to manage all your expenses. We help you with budgeting your money across different categories that make your payments simpler and within limits. When you pay using our app, you’re able to keep a track of your money and never end up overspending. 

‍

Happy spending ! 

‍