Weak rupee and decreasing foreign exchange reserves will increase inflation, know how the country’s economy and public will be affected

Rupee reaches record low amid record inflation.

Inflation has reached the highest level in eight years. Rupee is at all time low. The country’s foreign exchange reserves are continuously decreasing due to the strengthening of the dollar and the selling of foreign investors. All these factors have a very bad effect on the economic recovery.

country’s economy (Indian Economy) is currently grappling with serious challenges. The value of rupee is decreasing due to which imports are becoming costlier. The price of crude oil is increasing due to which the import bill has increased. Foreign investment is going from here. In the midst of all these circumstances, the Reserve Bank’s foreign exchange reserves ,RBI Foreign exchange reserves) has been under pressure for the past few months and has slipped below the psychological level of $600 billion. The country’s foreign exchange reserves declined by $1.77 billion to $595.95 billion in the week ended May 6. Due to this, there was a decline of $ 2.695 billion in foreign exchange reserves in the previous week.

The country’s foreign exchange reserves have fallen by $ 28 billion in the last six months till March 2022. Since February 24, when Russia invaded Ukraine, India’s foreign exchange reserves have decreased by about $ 34 billion or 5.4 percent. There has been a decline. The rupee had gone all-time low in the week ending March 11. Since that week there has been a continuous decline in foreign exchange reserves. In fact, due to the increase in the interest rate and inflation from the Federal Reserve, the demand for the dollar is increasing and it is getting stronger.

Foreign reserve reached $ 642 billion

India’s foreign exchange reserves had once reached a record level of $ 642.45 billion. The country’s foreign exchange reserves were at an all-time high in the week ended September 3. This was enough to cover the country’s imports for 15 months. At present, the amount in the treasury of the Reserve Bank is enough to meet 12 months of imports.

RBI’s efforts fail

The rupee is currently at a record low level against the dollar. The Reserve Bank is making all efforts to strengthen the rupee. However, this effort does not seem to be successful. In fact, the dollar has strengthened due to the increase in the interest rate from the Federal Reserve. The dollar index is currently near the level of 105, which is the highest level in two decades.

Rupee slips 65 paise this week

This week the rupee closed at 77.55 against the dollar. This is an all time low level. The reason for this decline is rising inflation concerns and strengthening of the dollar. The rupee fell by 65 paise on a weekly basis. Rise in trade and current account deficit, outflow of foreign investors, strengthening of the dollar are the three factors that have led to a fall of more than 4 per cent in the rupee this year.

30 per cent jump in trade deficit in April

India’s trade deficit stood at $ 20 billion in April. It has grown by 30 per cent on a yearly basis. On the other hand, foreign investors have withdrawn Rs 1.60 lakh crore from the Indian market so far this year. Experts say that if the rupee weakens, then inflation will increase.

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India imports many essential products

India imports 85 per cent of its oil requirement. The effect of inflation will be more severe as the payments are in dollars. Apart from this, India imports dozens of products including edible oil and fertilizers on a large scale. The prices of all these have increased due to which the trade deficit is increasing along with the import bill.