Impact of rupee depreciation:

♤ RBI’s monetary policy: If the depreciation in rupee continues, it will further increase inflation. In such a situation RBI will have very less room to cut policy

rates. No cut in policy rate will add to the borrower’s woes, which are eagerly

waiting to get rid of the high loan regime.

♤ Fuel price: A weak rupee will increase the burden of Oil Marketing Companies (OMCs) and this will be passed on to the consumers. If the OMCs increase fuel prices, there will be a substantial increase in overall cost of transportation, which will stoke up inflation.

♤ Country’s fiscal health: A frail rupee will add fuel to the rising import bill of the country and thereby increasing its current account deficit (CAD). A widening CAD is bound to pose a threat to the growth of overall economy.

♤ Importers/Exporters: Importers will strongly feel the pinch of falling rupee as they will be forced to pay more rupees on importing products. Conversely, a feeble rupee will bring delight to the exporters, as goods exported abroad will fetch dollars, which in return will translate into more rupees. Also, a weak rupee will make Indian produce more competitive in global markets, which will be fruitful for India's exports.