-- Ayn Rand
We have all been seeing the rupee sliding down against the major currencies and have been reading its effect on different macro economic factors. This is due to various issues affecting the Indian economy. Does the downward slide affect the common man or woman as well? Of course it does. Let us see some of the positive and negative aspects of the falling rupee on us.
Let us first look at the brighter side of things. If you are someone who is earning in foreign currency, then the rupee value of your income rises as for every dollar/pound that you earn you are going to get more rupees.
If you are an NRI, you could take advantage of the situation by converting your income to rupees or invest in some assets in India like real estate or blue chip stocks. You can also invest more in NRE (Non Resident External) and NRO (No Resident Ordinary) fixed deposits, as potential returns will be higher. Of course, these should be well researched decisions and should be taken after consultation with your financial planner. If you are one of those who have investments abroad, your returns will of course get a boost when seen them in rupee terms.
Just as every coin has two sides, the falling rupee also hurts you in some ways.
If you have some liabilities abroad, it will be tough for you as the interest costs and repayment costs will rise. India imports a lot of crude oil and this import bill will rise due to the weakening rupee. This has already influenced the rising petrol prices across the country. This in turn will adversely affect the transport costs of goods ferried across different parts of the country. This results in costlier vegetables, fruits, pulses and other necessities. The household monthly budget will also increase as prices of these products will rise with an increase in production costs. Some of these costs, if not all will be transferred to the consumer. All imported goods be it essentials like medicines, or consumer electronics like cameras, laptops, smartphones will become costlier and this will affect your expenses directly.
The monthly budget could also feel a pinch, as companies will look to cut costs in this inflationary scenario. There will be ways to rationalise human resources’ costs. This could be in terms of reducing the salary, hiring lesser people or keeping number of people constant and increasing productivity and efficiency. All this will result in reduced savings for the common man.
If you have planned a vacation abroad, your budget will go overboard as you have to shell more rupees for all expenses. If you are going abroad to study, fees and other monthly expenses abroad will rise in rupee terms. The loan that one might have taken for education abroad might fall short of what is required and that has to be taken care of accordingly.
Which of these categories are applicable to you? Do let us know how the falling rupee has affected you.
The rupee has depreciated considerably and this has a direct and an indirect impact on our personal finances. The falling rupee affects assets, loans, income and expenses and one should do a quick check on his/her financial plan to assess the real impact.