Now why Indian Rupee is Depreciating ?
This is purely arithmetic of Demand and Supply. India’s Demand for Dollar is much more than Supply of Dollar
a) Our Imports are increasing and Exports are not increasing but rather decreasing and there is a Current Account Deficit.
b) CAD –Current Account Deficit represents difference between India’s Import of Goods and Services and its Export of goods and services plus the Remittances by NRI
c) India does not earn enough Forex to pay for its Imports
d) Uptill now we were able to manage the difference by incoming foreign direct investments from FIIs.
e) Till July Our Imports were to the tune of 550 billion Dollars and Exports were to the tune of about 309 Bn.Dollars
f) To meet this Gap we have to either Reduce our Imports or increase our Exports
g) Our Imports are large because of our large population and so large requirements
h) Exports are not increasing because of several factors like low level of production due to various factors like shortage of power, gas,coal, water and other infrastructure, delay in clearances and lack of supportive policies by the govt or so called Policy paralysis.
i) F I Is are withdrawing their investments to avoid further losses and New Investments are not coming because of fear of political instability, message of Retrspective Taxation and lack of supportive policies.
What are our Imports ? Let us look at what we import .
OIL Nearly 75 to 80 % of our imports is Oil ( Brent Crude ),
a) International prices of oil is continuously on rise
b) Now again with the fear of war in Cyria Prices may further go up.
c) Every one Rupee depreciation against Dollar India’s Oil bill goes up by Rs 8000 Crores. During last One month Rupee depreciated by Rs.10 say from 58 to 68 That means our oil bill has increased by 80000 crores.
d) Our local demand for oil is Never ending. New new cars are entering market everyday .There are cars and cars every where around but no Roads. Reason could be lack of cheap and efficient Public Transport . There is no sign that this position will improve in the near future. That is why people prefer to have their own vehicle. Therefore, demand for oil is Never ending.
GOLD
a) Second most important item of Import is Gold.
b) India is not producing even ONE GRAM of Gold but imported 1072 Tons of Gold last year. We are the largest importer of Gold in the world by paying Dollars
c) In 1999 the value of gold imported was Rs 17991 Crores and in 2012 we have imported Gold worth Rs.2,69, 563 Crores.
d) Govt. stock of Gold is about 360 Metric Tons. Private holding
of Gold in India is estimated to be around 35 k to 40 k MT
e) Gold held by Padmanabha temple in Kerala is yet to be accounted for..It is estimated to be worth around 2.2 Bn.Dollars.
f) Indians buy Gold traditionally as investment and hedge against Inflation .
g) There are no avenues in the Rural area for investments. No Share market ,No Mutual funds . Not much scope for Real Estate . Therefore, Gold is considered as best investment because Gold is Most Liquid Asset. That is why in India even in a smallest village you may not find a Ration shop but you will definitely find a Jewelry shop and at least one Money Lender (Savkar)
h) When there is ONE % increase in Income, Trade in Gold goes goes up by 1.5%
i) It is estimated that Gold in India if sold in the international market, it will take care of our Oil Bill for 5 years.
Electronics There is now craze for I phones, I-pads, laptops which are not
made in India . UP Govt imported 5 lac Laptops for free
distributors to Voters as Election promise..
Some how our EXPORTS are not matching Imports .That is why there is huge Current Account Deficit .We are not able to attract foreign Investments And there is no sign of improvement in the near future and therefore Rupee is Depreciating
IMPCT - of Rupee Depreciation
Positive –Who would benefit by Rupee Depreciation ?
a) Exporters will benefit because they will get more Rupees
b) IT Companies who have got their Contracts signed in Dollar Terms will get more Rupees when they receive the payment. TCS ,Infosys,Wipro Shares are doing very well .
c) NRIs who send remittances for investment or for maintenance of their parents/relatives will get more Rupees for the same amount of Dollar
Negative – Impact
a) Oil Companies will have to pay more rupees to get same amount of Dollars
b) Indian Companies who taken loans from abroad under ECB or other arrangements will have to pay more rupees for the same amount of Foreign Debt and for payment of installment / interest
c) Those who have sent their children abroad for education will have to pay more rupees for the same amount of Dollars to be remitted for their course fees, maintenance, lodging ,boarding, Laundry, hostel charges etc.
d) International Travel will become costly. Those Indian Tourists who are planning their tours abroad will have to pay more for their expenses abroad.
e) FMCGs who use imported materials in their product like cosmetics,
creams, shampoos will increase their prices.
f) Multi National Kitchen chains like McDonalds, KFC, Subway who import Kitchen Equipments will increase their prices.
g) All fancy gadgets like Mobile phones, Apple Phones, I-Phones, I-pads, Laptops will become costly.
h) Prices of imported Chemicals and fertilizers used by farmers will become costly so also the final product.
i) Lot of pulses and oilseeds are imported by India will become costlier.
Therefore , who will be most affected by Rupee Depreciation it will be the common Man who does not deal with Dollar who has not seen even One Dollar Note will be MOST affected guy by rupee Depreciation.
It is very simple. To bridge the Gap between Import and Export Govt. will require more Rupees to buy same amount of Dollars and from where these Extra Rupees will come ?
Govt. will have to increase the taxes and prices of petrol, diesel and gas .
And when prices of diesel and Petrol goes, cost of movement of essential commodities also go up which will lead to high Inflation.
Now Where do we go from here ? There is a fear that the International Credit Agencies will downgrade India which will send wrong and negative signals to Foreign Investors and therefore they will be discouraged from investing in India – so new Dollar investment will not come. There is a fear WAR in Cyria .
Therefore, I will not be surprised if the joke that Dollar will touch Age of -------------- does not come TRUE.
use only indian goods........use hindustani goods .............protect our rupee
vinay mohanty
This is purely arithmetic of Demand and Supply. India’s Demand for Dollar is much more than Supply of Dollar
a) Our Imports are increasing and Exports are not increasing but rather decreasing and there is a Current Account Deficit.
b) CAD –Current Account Deficit represents difference between India’s Import of Goods and Services and its Export of goods and services plus the Remittances by NRI
c) India does not earn enough Forex to pay for its Imports
d) Uptill now we were able to manage the difference by incoming foreign direct investments from FIIs.
e) Till July Our Imports were to the tune of 550 billion Dollars and Exports were to the tune of about 309 Bn.Dollars
f) To meet this Gap we have to either Reduce our Imports or increase our Exports
g) Our Imports are large because of our large population and so large requirements
h) Exports are not increasing because of several factors like low level of production due to various factors like shortage of power, gas,coal, water and other infrastructure, delay in clearances and lack of supportive policies by the govt or so called Policy paralysis.
i) F I Is are withdrawing their investments to avoid further losses and New Investments are not coming because of fear of political instability, message of Retrspective Taxation and lack of supportive policies.
What are our Imports ? Let us look at what we import .
OIL Nearly 75 to 80 % of our imports is Oil ( Brent Crude ),
a) International prices of oil is continuously on rise
b) Now again with the fear of war in Cyria Prices may further go up.
c) Every one Rupee depreciation against Dollar India’s Oil bill goes up by Rs 8000 Crores. During last One month Rupee depreciated by Rs.10 say from 58 to 68 That means our oil bill has increased by 80000 crores.
d) Our local demand for oil is Never ending. New new cars are entering market everyday .There are cars and cars every where around but no Roads. Reason could be lack of cheap and efficient Public Transport . There is no sign that this position will improve in the near future. That is why people prefer to have their own vehicle. Therefore, demand for oil is Never ending.
GOLD
a) Second most important item of Import is Gold.
b) India is not producing even ONE GRAM of Gold but imported 1072 Tons of Gold last year. We are the largest importer of Gold in the world by paying Dollars
c) In 1999 the value of gold imported was Rs 17991 Crores and in 2012 we have imported Gold worth Rs.2,69, 563 Crores.
d) Govt. stock of Gold is about 360 Metric Tons. Private holding
of Gold in India is estimated to be around 35 k to 40 k MT
e) Gold held by Padmanabha temple in Kerala is yet to be accounted for..It is estimated to be worth around 2.2 Bn.Dollars.
f) Indians buy Gold traditionally as investment and hedge against Inflation .
g) There are no avenues in the Rural area for investments. No Share market ,No Mutual funds . Not much scope for Real Estate . Therefore, Gold is considered as best investment because Gold is Most Liquid Asset. That is why in India even in a smallest village you may not find a Ration shop but you will definitely find a Jewelry shop and at least one Money Lender (Savkar)
h) When there is ONE % increase in Income, Trade in Gold goes goes up by 1.5%
i) It is estimated that Gold in India if sold in the international market, it will take care of our Oil Bill for 5 years.
Electronics There is now craze for I phones, I-pads, laptops which are not
made in India . UP Govt imported 5 lac Laptops for free
distributors to Voters as Election promise..
( Dond buy imported electronics, i pods, gold,
minimize use of oil/petrol/diesel)
EXPORTS a) Our exports are textiles, engineering goods ,leather, goods etc.Some how our EXPORTS are not matching Imports .That is why there is huge Current Account Deficit .We are not able to attract foreign Investments And there is no sign of improvement in the near future and therefore Rupee is Depreciating
IMPCT - of Rupee Depreciation
Positive –Who would benefit by Rupee Depreciation ?
a) Exporters will benefit because they will get more Rupees
b) IT Companies who have got their Contracts signed in Dollar Terms will get more Rupees when they receive the payment. TCS ,Infosys,Wipro Shares are doing very well .
c) NRIs who send remittances for investment or for maintenance of their parents/relatives will get more Rupees for the same amount of Dollar
Negative – Impact
a) Oil Companies will have to pay more rupees to get same amount of Dollars
b) Indian Companies who taken loans from abroad under ECB or other arrangements will have to pay more rupees for the same amount of Foreign Debt and for payment of installment / interest
c) Those who have sent their children abroad for education will have to pay more rupees for the same amount of Dollars to be remitted for their course fees, maintenance, lodging ,boarding, Laundry, hostel charges etc.
d) International Travel will become costly. Those Indian Tourists who are planning their tours abroad will have to pay more for their expenses abroad.
e) FMCGs who use imported materials in their product like cosmetics,
creams, shampoos will increase their prices.
f) Multi National Kitchen chains like McDonalds, KFC, Subway who import Kitchen Equipments will increase their prices.
g) All fancy gadgets like Mobile phones, Apple Phones, I-Phones, I-pads, Laptops will become costly.
h) Prices of imported Chemicals and fertilizers used by farmers will become costly so also the final product.
i) Lot of pulses and oilseeds are imported by India will become costlier.
Therefore , who will be most affected by Rupee Depreciation it will be the common Man who does not deal with Dollar who has not seen even One Dollar Note will be MOST affected guy by rupee Depreciation.
It is very simple. To bridge the Gap between Import and Export Govt. will require more Rupees to buy same amount of Dollars and from where these Extra Rupees will come ?
Govt. will have to increase the taxes and prices of petrol, diesel and gas .
And when prices of diesel and Petrol goes, cost of movement of essential commodities also go up which will lead to high Inflation.
Now Where do we go from here ? There is a fear that the International Credit Agencies will downgrade India which will send wrong and negative signals to Foreign Investors and therefore they will be discouraged from investing in India – so new Dollar investment will not come. There is a fear WAR in Cyria .
Therefore, I will not be surprised if the joke that Dollar will touch Age of -------------- does not come TRUE.
use only indian goods........use hindustani goods .............protect our rupee
vinay mohanty
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