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A rise in cost of crude raises fuel prices and inflation. The total remittance under LRS for the year 2019-20 amounted to $18.76 billion - 17 times the remittance of $1.09 billion in 2013-14.įUEL COST: A depreciating rupee increases the cost of crude import, which accounts for almost 20% of India’s imports. In 2019-20, resident Indians remitted $4.99 billion, under the liberalised remittance scheme, for the purpose of study abroad, besides $6.95 billion for travel. Besides the fee, the cost of living too will be higher with the rupee depreciation. A 5% depreciation in the rupee from 72.5 to 76.125 would raise your cost for one year from Rs 36.26 lakh to Rs 38.06 lakh- a jump of Rs 1.8 lakh - while a 10% depreciation would raise a year’s fee to Rs 39.87 lakh. On the other hand, if you are an exporter or an NRI sending money back home, depreciation would fetch you more rupees per dollar.ĮDUCATION ABROAD: Suppose your daughter plans to go for a higher education in the US for a course with an annual fee of US$ 50,000. ? JOIN NOW ?: The Express Explained Telegram Channel How can the rupee depreciation impact you?ĭepreciation in the rupee impacts all expenditure in dollar terms- imports, foreign education, travel, investments abroad, medical treatment etc. While they may step in for high volatility, they would not step in for a gradual decline,” said Sabnavis. “Since we think that exports will rise, RBI will be comfortable with any depreciation and would not step in. The general feeling among experts is that the RBI may not intervene if the depreciation is gradual, but may do so if there is a big volatility. “Besides, the RBI has maintained status-quo on policy rates for the fifth consecutive meeting, amid the pressures arising from the second wave of the virus which are likely to crimp demand and hurt domestic currency… (The rupee) looks poised to witness further depreciation in the coming days, even as sustained portfolio inflows are still underpinning the local unit,” Sachdeva said.
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Sugandha Sachdeva, vice president–commodity and currency research at Religare Broking, said Covid-19 trends have created an atmosphere of lingering uncertainty, posing risks to an already fragile state of recovery. Since March 1, the dollar has gained close to 1.6% against the euro. The dollar, which was trading at 1.233 to a euro in early January 2021, is currently trading at 1.186 to a euro, a gain of 3.8%. While I see the rupee (stabilising) around levels of 74-74.5 against the dollar, the weakness in the rupee will be determined by strength in the dollar which is gaining… It will also depend upon bond yields in US, inflow of dollars and how FDI behaves amid the pandemic affect,” said Madan Sabnavis, chief economist at Care Ratings. “Amid the Covid scare and inflation inching up, the RBI has taken a very liberal view and assured an accommodative stance and is looking to keep the yields stable even as they are inching up in the US.
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This, along with a rising dollar, is creating grounds for the rupee to depreciate further. The newly announced programme, called G-SAP, is being read as a sort of quantitative easing policy in which the RBI tries to support the government’s elevated borrowing programme through infusion of liquidity.
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