Money Losing Value
Strong dollar means financial tsunami for common man
My toddler on her 10th birthday was gifted 100 US Dollars by her cousin. When I made her aware that the value of her gift was equivalent to Rs.4,600, she got excited. She counted 100 US dollars for buying a new bicycle and the one she had chosen to buy was available at around Rs.6,600. The exchange rate at that time was hovering around Rs. 44 per US dollar. When I told her about the appreciating trend of the dollar, she dumped the dollar in her cupboard to exchange it only when it fetches more. She, then, didn’t insist for new bicycle. But after a year or so, I purchased a new bicycle for her – the same one which she had desired. This time the bicycle was available at Rs,7,500. So within a year the price had escalated by Rs.900. At the same time, the dollar too had appreciated and was valued at a little over Rs. 50 in the second last month of 2011. No doubt the dollar fetched her some more bucks, but the commodity she had desired to purchase one year back too was now costly.
The point which I am trying to explain is that the appreciation of the US dollar against our rupee is common man’s irony and a joy for few only. The falling rupee is making a serious dent on our individual finances. Its depreciation is putting huge pressure on the already high inflation with essential and other imports getting costlier.
As the rupee is falling from grace, lot of hullabaloo in media has been created by bring up macro-economic matters such as slowing economic growth, corporate earnings and stock market volatility on the forefront. However, the falling rupee hurting the common man hardly gets a mention in discussions.
From essential commodities to the ritzy gadgets, the depreciating rupee is hurting us in many ways. On one hand, our domestic budgets have been squeezed by high inflation and on the other continuing rupee fall have made crude oil, fertilisers, medicines and iron ore, which India imports in large quantities, costlier. No doubt, these items are not for our daily consumption, but have an indirect adverse impact on our finances.
A case in point is fuel. A weak rupee influences petrol and diesel prices, as we are dependent on import of crude oil. Fuel has a direct bearing on the cost of transportation. This means the prices of goods transported from one place to another are bound to rise. Ultimately this rising cost of goods has to be borne by the common people as consumers of the products. There are edible oils which are derived from imported crude palm oil. The falling rupee has made it now costlier and the rise in its price adds to the inflationary pressure. Fast moving consumer goods like soaps, detergents, deodorants, shampoos too automatically witness price rise whenever dollar gets stronger.
The rupee depreciation has added to the woes of the companies involved in production of fast moving consumer goods and they have been kept engaged to revise the prices of their commodities now on regular basis to insulate against losses. In the coming months, common man will have to bear the brunt in further price escalation atmosphere.
Students who have taken loans to fund their foreign degree are also bearing the brunt. Education loans are usually in rupees, but as students pay their expenses in a foreign currency, the cost of education and stay has increased. The cost is in a foreign currency while the borrowing is in rupees. So, the students may fall short of funds as the loan would have been taken according to the initial requirements. These additional expenses have been not less than a tsunami for the parents as this weakening of rupee was unseen by them.
So under the circumstances, when our money is losing value, you need to navigate your finances effectively through these rough waters.
Lastupdate on : Fri, 22 Jun 2012 21:30:00 Makkah time
Lastupdate on : Fri, 22 Jun 2012 18:30:00 GMT
Lastupdate on : Sat, 23 Jun 2012 00:00:00 IST
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