A WEAK RUPEE will drive up the costs of external borrowing as well as hedging for domestic firms. It may not spur exports meaningfully, given fears of recession in key markets, but it will continue to inflate the import bill, causing the current account deficit (CAD) to rise, economists said.
Once the psychological 80per-dollar barrier is breached, the domestic currency may fall further, some of them said. Higher imported prices of raw inputs like coal will push up electricity costs, while elevated rates of imported fertiliser will inflate the government's subsidy bill.
However, they also indicated that some amount of rupee depreciation is warranted for India to retain export competitiveness, as the currencies of the country's competitors, too, have weakened against the dollar.
This story is from the July 20, 2022 edition of Financial Express Mumbai.
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This story is from the July 20, 2022 edition of Financial Express Mumbai.
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