Presently, the world witnesses the rupee depreciation touching a record low of 3.5% as compared against the dollar in 2022.
Moreover, such significant rupee depreciation is a byproduct of conflicts between Russia and Ukraine.
After all, the Russia-Ukraine war fueled the rising oil and various other commodity prices.
However, increasing interest rates in the US also played a vital role in keeping the rupee under pressure.
Furthermore, the US hiking its federal reserves rates led to a significant withdrawal of FII’s from several Indian Markets.
In 2022, the nation witnessed the rupee opening at a record low of ₹76.984.
Perhaps, the experts’ concerns on current rupee depreciation hampering the Indian economy are not just assumptions.
Impact of current Rupee Depreciation on the economy
Presently, experts are sure of their predicament of widening current account deficits.
However, widening the current account deficit might deplete foreign exchange reserves and weaken the rupee.
Furthermore, such rupee depreciation is fracking the economy towards significant cost-push inflation.
The Government shows concern about the dividend earning as the prices of Crude Oil and other Imports rises.
Perhaps, if current rupee depreciation hiders the dividend earnings, it can affect the budgeted fiscal deficit.
Moreover, the current depreciation led to rising costs on imports.
The 2022’s Rupee Depreciation might cause a spike in domestic fuel costs, pushing up the prices on transp[ortation costs.
How does the Rupee Depreciation affect the Trades?
Presently, The Reserve Bank of India seems to avoid any intervention in aiding exports.
After all, the depreciation of any domestic currency has proven to boost their export tradings.
However, current depreciation adversely affects the Indian Import Tradings of crude oil and other crucial imports.
As stated by the Organization of Petroleum Exporting Countries, the market price of Crude oil is $127.93/barrel.
However, the landed price of Crude oil on March 8th, 2022, hiked upto $129.10, significantly affecting the Indian Import tradings.
The Current depreciation affects the Indian economy adversely.
Furthermore, the rupee keeps on weakening, and its external values go on a steep decline.
Presently, the depreciation is not just affecting the Indian Import trading but is adversely hitting the Indian economy.