PANJIM: The rupee slumped 30 paise to close at a fresh lifetime low of 81.09 against the US dollar on Friday, weighed down by the strong American currency overseas and risk-off sentiment among investors.
At the interbank foreign exchange market, the local currency breached the 81-mark for the first time ever and slumped to 81.23 against the American currency.
It finally ended at 81.09, down 30 paise over its previous close. On Thursday, the rupee plunged by 83 paise -- its biggest single-day loss in nearly seven months -- to close at 80.79, its previous record low. This is the third straight session of loss for the Indian currency during which it has lost 124 paise against the US dollar.
President of the Goa Chambers of Commerce and Industry (GCCI) Ralph De Sousa, reacting to this development, told Herald that India's foreign reserves will be hit the most due to costlier imports and increase in the current account deficit.
On the other hand, weak rupee in the International market makes Indian goods cheaper. The imports have increased in the past few years but so have the exports for which we will have to pay more.
“Indian foreign exchange reserves are also dropping due to capital account imbalance as foreign investors are pulling out from capital markets. India has faced a high ratio of public debt to GDP, which is increasing. This can lead to policy uncertainties and cutting of essential revenue expenditure,” De Sousa said.
“The interest rates, inflation can also take a beating. It is difficult situation to be in. Government will have to come out with an immediate response with a medium-to-long term action plan on the economic policies both micro and macro. This would help to re-assure anxious investors, domestic and foreign, who appear to be worried about the rupee’s slide,” the GCCI president added.
Chairman - Goa Association of Realtors, and Vice President - National Association of Realtors, India Amit Chopra felt that the drop in rupee value will have two totally divergent effects on the realty sector.
“One is increase in prices with the corresponding increase in things that we pay for in dollar, like petroleum, which will effect transportation costs and thereby cause a spiralling increase in construction costs, which may cause drop in demand. Second is that NRIs and OCIs earning dollars will find it a bit more lucrative to invest in India, which can increase demand,” said Amit Chopra.
He hoped that the government will ensure that prices of things like petroleum products, cements, steel etc do not go up by giving a little reduction in GST rates, and further recognising realty sector contribution to building the nation by giving it much awaited industry status and providing some incentives (like tax breaks, etc) to the sector.
Goa nearly produced 12 per cent of the total pharmaceutical produce in India. Sources in the pharmaceutical industry said, “We will be affected both ways. If we buy the raw material in US dollar it will cost us more. However, if we export the finished product to the USA, the industry is set to gain.”
CEO of Sapna Technologies an IT company from Goa which is into 100 per cent export of software, Nilesh Nayak said, “We invoice in GBP which is at an all time low. This has affected earnings in a big way. Moving forward unless the GBP increases against the rupee it will have serious ramifications for exports to the UK.”
Noted Chartered Accountant of Goa Sandip Bhandare was of the view that the escalating inflation in the USA was having a butterfly effect over the rest of the world.
“The USD Federal Reserve is reversing its pandemic era policies and increasing interest rates, which is causing dollars to flow out of India. The tightening of the rates may no doubt help the exporters and IT sector, but the heavy impact on import of essential supplies, the bond market and inflation may nudge the RBI to use its own monetary policy tools very soon. These could include further raising of interest rates, thereby squeezing the liquidity of the system and increasing the cost of finance for businesses,” said Sandip Bhandare.