oppn parties Rupee Slides To 77 Per Dollar, Adds To Inflation Worries

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  • Ministry of External Affairs said that China is building bridges in the areas occupied by it in Pangong
  • India tells Western nations that there is no global shortage of wheat so it should not name India alone as the country has suffered setback in production due to the heatwave in March
  • RBI has slashed the dividend it pays to the Centre by 70% to Rs 30307 cr. Last year it had paid Rs 99132cr
  • Probe panel says that the Telangana encounter of 4 rape accused was staged
  • A Mathura court says that the Mathura Shahi Idgah case does not fall under the Places of Worship Act
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  • CBI files fresh case of corruption against Lalu Prasad and family for scams when he was railway minister
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  • In a day of assured trading on Friday, bulls make a comeback: Sensex rises 1534 points to 54326 to recover all losses of the earlier session, Nifty rises 456 points to 16266
  • IPL: Ashwin scores a quick-fire 40 to take Rajasthan Royals home against CSK and ensures top two finish
  • Supreme Court sentences Congress leader Navjot Singh Sidhu to one year rigorous imprisonment in the 1988 road rage case
  • Home Minister Amit Shah says rights should not be demanded before fulfilling responsibilities and that universities are no place to wage ideological battles
  • NIA court convicts JKLF chief Yasin Malik in terror funding case after he pleads guilty of all charges
  • A study backed by PM-EAC has recommended universal basic income and urban job guarantee and greater spend on social sector schemes
  • Supreme Court rules that the decisions of the GST Council are not binding on the Centre and the states, leaving the door open for states to levy further taxes
Supreme Court transfers Gyanvapi case to Varanasi district judge
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Rupee Slides To 77 Per Dollar, Adds To Inflation Worries

By Linus Garg
First publised on 2022-05-10 03:26:44

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

The US dollar, already gaining strength after the 50 basis point rate hike by the US Fed last week, raced ahead on Monday to weaken most currencies. The Indian rupee breached Rs 77/$ for the first time and touched Rs 77.53. The RBI is unlikely to use its reserves to shore up the currency. The expected huge inflow of foreign funds in the LIC IPO also did not materialize as FIIs showed muted interest in the issue and that further weakened the rupee.

Although a weakening rupee makes it better for exporters who get more for every dollar and makes it attractive for FIIs to invest in India (they were withdrawing huge amounts from the capital markets after the rate hike by the Fed) while at the same time making it costlier for them to withdraw funds, on the flip side it makes imports costlier, especially crude imports and that will add to overall inflation.

As the RBI had targeted inflation and recently raised interest rates in an off-cycle meeting, a weak rupee adds to its worries as costlier imports of crude and commodities will definitely add to inflationary pressures in the short term. Most experts feel that with $600bn in forex reserves, India is comfortably placed and the RBI can intervene if the situation goes out of hand.

But if the situation persists and the rupee slides further, India's import bill will balloon. Further, if most commodities and inputs become costlier, domestic companies will raise prices of products leading to inflationary pressure. If the rupee does not stabilize in a couple of days and if the fall continues unabated, the RBI will have to intervene without worrying much about the drain on reserves as runaway inflation will be a bigger worry than a dip in forex reserves.