Dollar Touching 58 Rupees: Who is Gaining and Who is Losing?

Well! Few days back, Indian rupees hit the rock bottom of Rs 58.16 for $1. Many economists believe it is because of lack of economic reforms and other governing issues have caused this problem.

It really does not matter what is your political inclination. You could be from left or right or even center. However, every school of thought agrees on one point that the economy of the country is not doing well.

IndianRupeevsUSDollar

With rupees dropping such a low level, could be anyone who is gaining from all this.

In this article, we shall look at who is gaining and losing from the present situation.

First, let us see who all are gaining.

According to experts domestic IT sector could see a growth because of softening of Indian currency.

The reason is simple, a stronger dollar will boost the sales of software companies in Indian rupees because most of these companies generate their half of the revenue from USA.

Arup Roy of Garter Research Director said this “Rupee depreciation will impact IT and off-shore service providers in a positive way if it sustains for a longer period say for this quarter. It will help in expanding their margins to a certain extent,

In April, a rupee was around 50 compared to one dollar. If you see the share of Infosys then it was up half a percent, TCS or Tata Consultancy Services increased by .5 percent, while small companies like Infotech enterprise rose up to 3% and Hexware technology was up .3 percent.

So there is a positive sign for domestic IT companies from the downfall of rupee.

The other sector that could gain from a weaker rupee is Pharma. For example, Sun Pharma sales for US only were around 54 percent of its gross sale in fiscal year 2012-2013.

Similar, Dr Reddy’s generated 45 percent of its total revenue from North American Market only.

But the real gainers from the depreciation of rupees against US dollar would be our farmers and agriculture sector as a whole.

India is leading exporter of rice and wheat. However, the country has to face tough competition from rivals Vietnam and Pakistan which offers their rice at low price.

However, with the depreciation of rupees India’s export has again gone up and it has become number one exporter of rice again.

Degrading of rupees has given India an extra edge over its south Asian neighbors.

India’s 5 percent broken parboiled rice is begin offered around $427 per ton compared to $473 per ton for the same variety by the Pakistan.

Prices of Indian Basmati rice has decreased by $100/ton over the past month.

Moreover, with good monsoon India could explore new markets in European Union, Japan etc.

Similarly, India is also going to benefit in wheat export. Early, Russian and Ukrainian growers were dominating the wheat market but now with weakening of rupees could change the situation.

India wheat is offered for $332/ton compared to $355/ton for Australian Standard white wheat.

Thus, exports of various goods are expected to rise sharply once the monsoon is over and crops are harvested.

Similarly, there are many such agriculture products which are going to see increase in their exports.

This is very good news for agriculture sector and farmers as well.

Now, we should look at who are the losers.

Weaker currency of a country could easily weaken fiscal and economic reforms taken by its government. It is because of these reforms a country is able to get foreign direct investment.

There could be sudden rise in inflation hence cost of commodities could increase sharply hence affect the common man.

The mid-tier and low-tier handset manufacturers, who imports into India will suffer badly.

Power generating companies, Telcos and cement manufacturing companies are also going to lose badly.

If we see their performance in share markets then Reliance communication was down by 6.53 percent, Adani Power and Tata Power down by 3.31%, JSW Steel by 4.14% and state owned SAIL down by 2.06%.

It is because of their foreign currency borrowings these companies will hurt.

Moreover, oil companies are also going to lose from weakening of rupees.

Crude oil prices in dollars have remained stable at $101 per barrel. However for Indian oil it has jumped from 3.5 percent to Rs 5,751.83 a barrel.

Shares of BPCL were down 3 percent, HP or Hindustan Petroleum down 5.6 percent and Indian Oil Corp down 1.92 percent.

Therefore, you could clearly see Oil companies are the sole losers because of rupees depreciation.

It also means oil companies are going to increase prices of petrol and diesel hence putting burden on common man.

But above all, weakening of rupee might worsen the trade deficit. Next is it could also affect foreign investors to invest in India.

In a nutshell, prime gainers are small software firms, Pharma industry and the biggest gainer is our agriculture sector.

On the other hand, sole losers are oil companies, telecommunication companies, power companies and above all the country because confidence of foreign investors has been shaken.

In conclusion, I would say falling of rupees against dollar has both gainers and losers. However, if we take in account of overall situation then it is not good for the country as a whole.

Because it is going to increase our trade deficit. Let us see what happens next two months and what our policy makers are planning to reduce this depreciation.

Comments

  1. Mohandas says

    Yes, U have travelled through the merits & demerits of rupee situation.But in toto it is affecting a common man, isn’t it ?They have to tighten their belt for the basic necessities as they often pay through nose.Don’t you think that economic reforms are inevitable to protect our fellow beings?

  2. VENKATARAMANAN SUBRAMANIAN says

    DEAR MS PRIYA,
    I LIKED UR ANALYSIS OF THE ECONOMY,AND THE DIFFICULT TIMES WE R PASSING THRU,BUT WHEN WILL THE SITUATION IMPROVE.WITH THE POLITICAL SCENERIO IN DOLDRUMS,I DONOT FORESEE ANY IMPROVEMENT IN THE SITUATION.IN THE IMMEDIATE FUTURE.

  3. V K Kacker says

    Thanks Priya for an in-depth analysis of the impact of depreciating rupee.
    But your comment that pharma companies are going to benefit is only half true as only those pharma companies having their major income from exports may benefit whereas the domesting companies are likely to be loosers in the sense that input costs are increasing with NO CORROSPONDING increase in the margins and now new DPCO also in place the total impact on the domestic pharma companies is yet to be assessed.
    However once again thanks for the article. KEEP POSTING.!!

  4. Ashis Das says

    Fall of rupees price than US$, don’t know, what is doing our great, great Economists? Ordinary people, like me/us have no activity(s) regarding the fall of Rupees. However thanks a lot to you, Ms. Priya.

    • Ankur Agrawal says

      Thankyou mam!!! Thank you very much. These e-mails are really helping very much, I’m getting the informations and knowledge i always wanted. Thankxx again….and keep mailing me….:)

  5. shabnam says

    thanks for this information priya. But in dis situation wht can done to help. Plz let me knw. Thanks once again

  6. Emefuru Blessing says

    the rupee has fallen against most major currencies.
    The decline has been 12 per cent against the pound,6 percent against the euro and 21 percent against the yen.

  7. Mahesh says

    Yes I would say every Indian is affected due to the fall in Rupee.For that I would give simple example.We have to pay in $ for every buying in International market whether it’s Gold or Oil.Fall in Rupee means you have spend more on imports and due to this price index goes up because fuel prices go up and everything becomes costly. Our import is also not good due to which , we can have dollars in our treasury and can balance our import / export.

  8. vijay says

    yah;; piya,you are absolutley right and seen on the market well defined for the upcoming period; however common man is again to be in trouble of all these poor management of economics in a devleoping natin like ours. we shall hope for a recovery by next couple of years;

  9. bhaskar says

    Priya, thanks for such indepth study . Well situation prevailing at present is not good for our country.
    Thanks.

  10. bhaskar says

    Hello Priya,
    Thanks for such indepth study. Situation prevailing at present is not good for our country.
    Thanks.

  11. DILAWER says

    THNX PRIYA. .V. EDUCATIVE ARTICLE.GENERALLY I KNEW -WEAK RUPEE-GOOD FOR EXPORTERS, BAD FOR IMPORTERS. BUT THNX FOR BREAK-UP DETAILS. REMEDY???
    -DILAWER-+91 9820571521

  12. devappa kundapur says

    hai priya it realy true . what u said at present at rs aganist dolar particularly in india. but what we can do for that i need wise answears. o.k. tellme now……….

  13. Mahendra Surve says

    Yes every Indian specially Middle Income/Lower Middle income group would affect badly. By the way today 1 dollar costs Rs.59.95 ( 3 pm IST )

  14. Kunal Mehta says

    Hii priya,
    I recently mailed you for part time opportunities on your gmail id., so still not got the reply. so plz do d needfull asap.

  15. Mayank Shridhar says

    Yeah its real problem for foreign investors due to rupee weakness causing less interest in foreign trade and investment in our country as they will not get there returns further which results in low marketing which reducing jobs opportunities cause a hurdle for younger generation

  16. RATHEESH says

    still I did not ready fully, anyway thank you for your wonderful information. I also expect like this thoughtful article more. Thank you so much.

  17. Aashish Kumar Maurya says

    Yes when we see overall situation then it is not good for the country as a whole. Because the employes of small software firms, Pharma industry and the biggest gainer is our agriculture sector are also face the problem of high pricess of petrol and deasel which impact on our daily life goods.

  18. says

    The depreciation INR will benefit a few sectors and adversely affect others. The point to be noted is the repercussion of this depreciation. The rupee’s recent decline has been against all the major currencies, not just the U.S. dollar and is the worst performer among major Asian currencies. This clearly shows financial mismanagement and if the rupee does not recover it will cause lot of hardships to the common man.

Leave a Reply

Your email address will not be published. Required fields are marked *