With the Indian rupee approaching 80 to the US dollar, imports of everything from crude oil to technological goods, education abroad, and foreign vacation would become more expensive, sparking concerns that the inflation situation may deteriorate. The biggest and immediate consequence of a falling rupee is on importers, who will have to pay more for the same amount and price. However, it benefits exporters by providing more rupees in exchange for dollars.

The decline in value of the rupee has nullified some of the benefits accrued to India as a result of the return of global oil and fuel prices to their levels before the Ukraine conflict. To meet its demand for fuels such as diesel, gasoline, and jet fuel, India is 85 percent dependent on oil imported from other countries. After falling to an all-time low of Rs 79.99 to the US dollar on Thursday, the rupee gained 7 paise and was trading at 79.92 in early trade on Friday.

How A Weakening Rupee Is Likely To Affect Spending

• Overseas education: If the rupee depreciates against the US currency, foreign schooling will become more expensive. Education loans have become more expensive as a result of the RBI's interest rate hikes, not merely having to pay more rupees for every dollar charged as fees by overseas institutions.
• Imports: Importers must purchase US dollars in order to pay for imported goods. Importing things will become more expensive as the rupee falls. Not only will oil become more expensive, but so will electrical devices such as luxury cars, mobile phones and appliances.
• Remittances: Non-resident Indians who transfer money back home, on the other hand, will end up sending more in rupee terms. According to the most recent figures, the country's imports increased by 57.55 percent to USD 66.31 billion in June compared to the previous year.
• Foreign travel: As the pandemic instances have decreased, there has been retaliatory travel for both job and pleasure. However, these have recently gotten more pricey. Those travelling overseas must exchange their home currency for the currency of the destination country. A weaker rupee indicates that more money is needed to convert the same quantity of currency as before. However, if the currency of your destination country falls as well, you will be unaffected. Because forex markets have become extremely volatile, it is strongly advised to hedge currency risk by using fixed-rate forex cards. Also, if their trip is close, travellers should keep an eye on the currency exchange rates and freeze the rates of their travel money as soon as the prices look favourable.

Wrapping Up

Depreciation will cause inflation, and the prices of devices will fall. Already, due to supply chain shock in China, the costs of electronic components, particularly controllers, have nearly tripled in the last two years, and due to the rapid depreciation of the rupee, the commodity prices of all imported components will climb further.

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