AS THE RUPEE hit a fresh trough of almost 77 against the greenback Monday, exporters expected the weakening currency to partly offset the impact of elevated shipping costs and supply chain disruptions in the wake of the Russia-Ukraine crisis. If the rupee stabilises at a depreciated level in the next one month or so, it will support exports, they told FE.
But at the same time, a weak currency-coupled with a spike in global crude oil prices would inflate India's import bill and pressure the current account, as New Delhi is a net commodity importer. This will also feed into inflation, cause a further surge in the already-elevated input costs for companies and further erode their margins, senior corporate executives cautioned.Even the currency hedging costs of large firms tend to go up in such situations. The cost escalation could hit the cash flow of firms and potentially delay the completion of housing and other infrastructure projects, some of them said.
The cost of capital goods, mostly imported, will also go up at a time when the government has stepped up focus on capital spending to spur economic growth. India imported machinery worth almost $40 billion and transport equipment, including auto components, of another $13 billion in the first 10 months of this fiscal. Together these two segments made up as much as 11%ofthe country's merchandise imports.
This story is from the March 08, 2022 edition of Financial Express Mumbai.
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This story is from the March 08, 2022 edition of Financial Express Mumbai.
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