the transportation cost and indirectly lead to rise in the price of goods. Here is the impact of rupee depreciation:Īs the rupee depreciates, the crude oil import bill will rise, which, in turn, will lead to a rise in both petrol and diesel prices. India's external debt is held in multiple currencies, the largest of which is the United States dollar. Meanwhile, the country's external debt rose to $593.1 billion in September 2021, from $ 556.8 billion a year earlier.
Meanwhile, imports in February 2022 were $55.01 billion, an increase of nearly 35 per cent over Rs 40.75 billion in February 2021.
The merchandise exports in February rose 22 per cent to $33.81 billion against $27.63 billion in the same month last year. India's trade deficit in February widened to $21.19 billion, the commerce ministry data showed. It poses the risk of imported inflation and may make it difficult for the central bank to maintain interest rates at a record low for longer. While a weaker currency may support exports amid a nascent economic recovery from the pandemic. The ongoing depreciation of the rupee is also set to make borrowings in foreign currency expensive for corporate India. The prices of oil will inflate the import bill and in turn the trade deficit. India imports nearly three-fourths of its oil, making it one of the most vulnerable in Asia to higher prices. This spells trouble for the government as rupee depreciation is a double-edged sword - the exporters will gain but it will pinch the importers who make transactions in dollars. Sustained foreign fund outflows and a lackluster trend in domestic equities also weighed on investor sentiment, forex traders said.įoreign institutional investors remained net sellers in the capital market on Friday as they offloaded shares worth Rs 7,631.02 crore, according to stock exchange data.
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