Is Weak Rupee Bad News For Indian Economy?

Bangalore: The rupee plunged by a whopping 130 paise on 20th June to hit life-time low of 60 against the U.S. dollar in early trade on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers.

Besides, dollar's strength against major currencies overseas on comments by Federal Reserve Chairman Ben Bernanke that the central bank may scale back its monetary stimulus programme later this year weighed on the domestic unit, dealers said.

However, the weakness of rupee is turning out to be a bad news for the country’s economy. The continuous decline can bully the recent gains in inflation and demoralize much needed capital flows Economic Times reports the affect of rupee depreciation on the Indian economy.

First of all due to the fear of loosing more outflows, The Reserve Bank of India will not be able to cut rates. Along with that a week rupee value will make capital imports pricey which will compel companies to delay investments. The fuel charges may also mount up which can affect the consumer sentiments. Also, the foreign investors can postpone their investments until the things become normal.

(With PTI Inputs)

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