RUPEE FALL

MONEY ?
Money is the value assigned to a commodity, a piece of paper, a coin or electronic data (think online banking and credit cards). It can be of different types-commodity money, representative money, fiat money and commercial bank money

Commodity Money
. Gold coins, cocoa beans, cattle or anything that has a value of its own and is used as a medium of exchange is commodity money. The use of commodity money is similar to barter, except that the commodity used is widely accepted and can be easily handled

Representative money
Representative money is token coins and notes that can be exchanged for a fixed amount of precious metals or other commodities.

Fiat Money
fiat money's value is imposed by the government, which makes refusal of payments made in the notified legal tender, in the form of currency notes and coins, illegal.

COMMERCIAL MONEY
Instruments such as cheques, demand drafts and banker's drafts are commercial bank money

 "The value of a currency depends on factors that affect the economy such as imports and exports, inflation, employment, interest rates, growth rate, trade deficit, performance of equity markets, foreign exchange reserves, macroeconomic policies, foreign investment inflows, banking capital, commodity prices and geopolitical conditions,"

VALUE OF CURRENCY

REASONS FOR FALL IN RUPEE.

Worsening current account deficit

Insufficient FDI inflows

Rising Import bill

Rising import bill (arising out of gold) is also a major factor that has curtailed governments effort to tackle the fall of rupee. Gold contributes to over 10 percent of the total import bill. Gold imports were 141 tonnes in April and rose to 162 tonnes in May. Due to certain government measures gold imports declined significantly in June but could not be held for the month of July.

Overall economic contraction

Poor economic growth in the manufacturing, agricultural and mining sector has dented investor sentiment and they have become wary of investing in India. Reflecting a persistent slowdown, industrial production in May contracted by 1.6 percent, lowest in the past 11 months. Last week RBI cut its growth forecast to 5.5 percent for the fiscal year, from 5.7 percent. Unless a better sentiment prevails, confidence in the rupee will stay shattered.

Strengthening of dollar overseas

In the last six months US dollar index strengthened by 3.52 percent. The strengthening of dollar is beyond governments control which is ultimately hammering the Indian currency. Gradual recovery in US economy coupled with rising expectations that Federal Reserve will withdraw its stimulus package soon is underpinning the US dollar index.

IMPACT OF RUPEE FALL

The rupee, which reached 68 vs US dollar on Wednesday, hasn't been this bad in over 18 years. It is going to affect the common man in many ways like expensive foreign travel, costlier imported goods and higher EMIs.

GROCERY BILL
High inflation has been pinching you for more than a year now. Now, the weakening rupee has made crude oil, fertilisers, medicines and iron ore, which India imports in large quantities, costlier. Though these items are not for your daily consumption, they impact your finances indirectly

Influence petrol and diesel prices

FUEL being directly connected with the cost of transportation, prices of goods that are transported from one part of the country to another, such as food, are bound to rise. This will have a direct impact on the household budget," s

FMCG, or fast moving consumer goods

such as soaps, detergents, deodorants and shampoos, of which crude oil is an input, are likely to become more expensive.

FOREIGN EDUCATION
With the rupee weakening, the burden has increased 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. For $100,000, a student had to pay Rs 45 lakh. Now, he has to shell out Rs 52-54 lakh, depending upon the exchange rate.

JOBS AND REMUNERATION

Not only is the rupee falling, for some, the pay cheque may shrink as well. Every industry which is dependent on imports will have to face an increase in cost of production and operations

VACATIONS
The falling rupee is bad news for itinerant Indians and vacationers to a foreign country. "Air fares are going up due to an increase in fuel surcharge. The stay will be costlier by at least 3-5%. Also, shopping can become expensive by 5%. Eating out will also be costlier by the same percentage

BUYING A CAR
The depreciation of rupee has impacted the automobile sector in three ways. First, input costs have risen as these companies use imported components. Second, some companies will have to pay higher royalty to foreign parent firms. Third, many have foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds

 ENTERTAINMENT The imported paperback, your favourite pizza and the latest laptop will also become more expensive. "There is an increase in the cost of imported books as well as the cost of sourcing them.

Electronic consumer goods

Electronic consumer goods such as computers, televisions, mobile phones, etc, with imported components will also become costlier. International food chains which run outlets in India are not denying the impact on profitability.

CONCLUSION
The depreciating rupee has had a significant impact on our capital expenditure as we import a lot of special kitchen equipment. There has been an indirect impact too as a small part of inputs are imported by our suppliers. If the trend continues, we will be forced to pass on some burden to customers,