Inflation will increase due to weak rupee!

 

The nation will face an increase in its import expenses owing to electric devices, machinery, and even gold. It has been predicted that the Bill will significantly go up as long with the rise in the global oil prices due to the depreciation of Indian rupee in relation to other currencies, if GTRI is to be believed, India struggled to pay 86,464 US dollars per 100Kg of gold as opposed to 65,877 US dollars last year, which quite a noticeable change. The country’s expenses on Imported coal, standalone vegetable oil, machinery, golden diamonds as well as plumbing chemicals and other synthetic items will also be subject to a drastic change if the currency rate remains unstable.

Rupee- failed to gain much

The GTRI’s report predicts an increase of 4.71% within the time period of January 16 2020 till now, with the rate depreciating from 82.8INR to 86.7INR. From January 2015 to 2025 this Yuan is also expected to follow the same footsteps, with an estimated decay rate of 41.3%. During the same time the rate is expected to drop from 41.2INR to 86.7, while the Chinese Yuan is set to around 3.24% depreciation, which translates to a price movement from 7.10 to 7.33 Yuan.

Prices will go up while the conditions facing the economy will become worse.

In the words of Ajay Srivastava who is GTRE founder, “India is set to face an increasing import payment while reaching out for raw materials and energy at a higher cost as the rupee depreciates. There exists a conflicting narrative where economists feel a weak rupee in India exports is beneficial while the data of the past 10 years indicates otherwise”.

As stated earlier, weakening the currency could lead to an increase in the amount of exports. For India, however, this has not been effective as shown by the data of a decade. The high importing sectors are booming whereas low-import labour-intensive industries such as textiles are suffering.

According to Srivastava, “From 2014 to 2024, total exports increased by 39 percent. During this period North India witnessed maximum growth in electronics machinery and computers, with exports rising by 232.8,146.24 and 152.4 percent respectively.”

At the same time, he pointed out, sectors that import less, like apparel, declined despite the fact that a weakening rupee would have enhanced their global appeal. ‘These trends demonstrate that a weaker rupee does not always encourage exports. It has the maximum adverse impact on labor-intensive exports and with lower value addition ideally encourages import-oriented exports instead,’ he explained.

GTRI had made critical recommendations

To that, GTRI explained that India must manage the delicate equilibrium of growth and containment strategies and maintains trade and rupee management policies in order to best achieve economic stability in the long run. “But the truth on the ground is very worrisome. Most of India’s more than $600 billion foreign exchange reserves are loans/investments which are obligated to be paid back with interest and therefore become less effective in aiding the stabilization of the rupee,” it said.