Recently, Indian rupee hit a record low of 80 against the US dollar. It has declined nearly 7 per cent since January this year. Devaluation of Indian rupees is going to make import costlier. India imports 20.96 per cent of its GDP. It includes mineral fuels, oils, electrical machinery, nuclear reactors, mechanical appliances, jewellery and many more. As all these imports are done in dollars, so, the weakening of the Indian currency against dollar is affecting these sectors.

Now, this is a double burden on common man with the country passing through high inflation and the prices of everyday items drastically going up each passing day. This slipping of the rupee comes as a threat to the Indian economy already grappling with inflation, widespread unemployment, power crisis, and high taxes. The RBI, in an emergency meeting last month also increased its key interest rates at a time when extreme inflation risks are rising and fears of a slowdown in economic growth activity prevails. Depreciation of rupee results in costly imports, which has a cascading effect on local prices, which subsequently begin to hike. It can also cause a further spike in domestic fuel prices, which would in turn push up prices of other essential items and services as an outcome of increased transportation costs.

If a country imports more than it exports, then the demand for the dollar will be higher than the supply and the domestic currency like Rupee in India will depreciate against the dollar. Main reason for the currency’s downfall is the money being pulled out from the Indian economy by foreign portfolio investors (FPIs). FPIs have pulled out Rs. 2.32 trillion from the economy in the last six months. Much of it was due to interest rate hikes by the central banks to contain the burgeoning inflation.

The rupee’s fall these days is mainly due to high crude oil prices, a strong dollar overseas, and foreign capital outflows. The rupee has been on the decline since early this year, especially after supply chain disruptions in view.

As money flows out of India, the rupee-dollar exchange rate gets impacted, depreciating the rupees. Such depreciation puts considerable pressure on the already high import prices of crude and raw materials, paving the path for higher imported inflation and production costs besides higher retail inflation. India imports 80 percent of its petroleum requirements from abroad. Since India mostly depends on imports, including crude oil, metals, electronics, etc., the country makes payments in US dollars. Now if the rupee is weak, it has to pay more for the same quantity of items. In such cases, the cost of raw materials and production goes up which gets passed on to consumers. Buying cars will also become more expensive as 10-20 per cent of a car’s total raw materials by value are imported.

Electronic items, such as mobile phones and other appliances are also likely to become more expensive.

Flying will also become more expensive as purchasing fuel will become costlier.

Modi government’s myopic policies led to this sharp fall of rupees in the international market in the last 8 years. During Dr. Manmohan Singh-led UPA government, Indian rupees was strong and cost of 1 Dollar was 58 Indian rupees. In the last 8 years, the values of Indian rupees depreciated gradually and reached at an all-time low. Modi as Chief Minister of Gujarat used to tell that when rupees fall, prestige of India is lowered. Now rupee has fallen at an all-time low, isn’t the prestige of country falling now? Prime Minister Modi is not willing to address these issues that country is facing presently. As Gujarat Chief Minister, Modi had also associated the value of Rupee to national pride and had declared that there was a competition between the UPA Government and the Rupees’ depreciation over which one can fall faster.

When BJP won the general election in 2014, the exchange rate of the Indian Rupee stood at Rs. 58.66 to a dollar. In simpler words, 1 Dollar was equal to Rs. 58.66. Since then, the value has slipped steadily and reached at 80 rupees against 1 $ Dollar.

Modi Government is losing all credibility because of its inability to curb the rupee’s free fall. Now the Rupee has crossed the age of Margdarshak Mandal. How much will it fall further? How much further will the government’s credibility fall? How long will the Modi government hide under the pretext of lies and deceits, when Indian economy is in shambles due to wrong policies of his government. Sky-rocketing prices of essential commodities have further aggravated woes of the common masses. Due to twin blow of demonetization and sudden country-wise lock down, people are facing hardship due to loss of income. All sections of society are affected due to price rise and it has become very difficult for lower middle class to fulfil their daily needs.

A large number of Indian students are studying abroad. Due to depreciation in rupees’ value, they will have to spend more rupees for their study overseas. Large segment of students studying abroad is from middle class families. Students’ families will be under tremendous pressure to borrow money to fund their wards’ education abroad. Overall economic scenario is very grim and there is no possibility of recovery of Indian rupees in the international currency market in near future.

The author is an Assistant Professor in Kirori Mal College, University of Delhi