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

News Snippets

  • Coal exploration plan worth Rs 2980cr cleared by Union cabinet
  • Government ploughs in Rs 89000cr in BSNL for 4G, 5G spectrum operations
  • Stocks gain on Wednesday: Sensex adds 350 points to 63142 and Nifty 127 points to 18726
  • Wresters agitation: Sports minister assures action by June 15, wrestlers put off agitation till then
  • WTC Final: India lose the plot after putting Australia to bat as Steve Smith stands like a rock and Travis Head counter attacks to put Australia (327 for 3) in command on the first day
  • Wrestlers agitation: Bajrang Punia. Sakshi Mallik and Vinesh Phogat rejoin work in Railways, BKU pulls back but wrestlers say agitation will go on
  • UP bahubali-turned-politician gets life in 32-year-old murder case
  • India-US seal defence cooperation roadmap as Defence minister Rajnath Singh meets US Defence Secretary Lloyd Austin
  • CBI probe in the train mishap will look at error in interlocking system and probe the sabotage angle
  • Violence continues in Manipur as three persons were killed after a mob attacked an ambulance in Imphal West district
  • Karnataka cabinet is likely to discuss cow slaugther law in its next meeting
  • Rahul Gandhi woos diaspora in the US, tries to show the fight in India as between those who believe in Mahatma Gandhi and those in Nathuram Godse
  • In preparation of a shutdown, MTNL moving operations to BSNL
  • Services sector sustains growth although Services PMI slips from 62 in April to 61.2 in May
  • Stocks gain handsomely on Monday: Sensex rises 240 points to 62787 and Nifty 59 points to 18593
WTC Final: Australia take firm grip on Day1 - Travis Head (146 batting) and Steve Smith (95 batting) take them to 327 for 3 as Indian bowling falters
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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.