Bikky Khosla | 22 Mar, 2022
Rupee has shed almost 3.5% against the US dollar this year. The currency has
remained in a range of 75.50-77 level, since the start of the Russia-Ukraine
conflict, and crude oil and commodity prices, and its consequent impact on the
current account balance, are likely to continue to put pressure on the
currency. Meanwhile, in another negative development Forex reserves have
plunged- the steepest in nearly two years- during the week that ended
on March 11.
Rupee depreciation gives a boost to exports and according to reports,
exporters of carpets, handicrafts and engineering goods expect up to 10%
benefit from the ongoing depreciation, but in contrast, labour-intensive export
sectors such as gems & jewellery, pharmaceuticals and electronics are going
to suffer as they are highly dependent on imports of inputs. With iron and
steel prices going up sharply, a weak Rupee seems to be only a temporary relief
even for those sectors now benefitting in short-term.
gems & jewellery sector is facing a double whammy
as the Russia-Ukraine conflict has sent gold prices soaring. Meanwhile, the
pharmaceutical industry, which exported drugs worth $591 million to
Russia and $182 million to Ukraine in 2020-21, expresses concern that western sanctions
against Russian banks may impact remittances of their outstanding trade receivables.
The consumer appliances industry is also concerned over rise in raw material
and shipping costs.
Meanwhile, the RBI said
that geopolitical crisis has heightened uncertainties over global macroeconomic
and financial landscape, and amidst these
testing times, the Indian economy is
experiencing spillovers as it recovers from the third wave of Covid-19. Consumer and business
confidence are rising alongside improvement in demand conditions, while on the
supply side, a resilient farm sector and a sustained retrieval in both
industrial and services sectors are broadening the recovery.
I invite your opinions.