Only available on StudyMode Text Preview
Rupee exchange DepReciation: impact analysis
January 2012
The Associated Chambers of Commerce and Industry of India
ASSOCHAM Corporate Office: 1, Community Centre, Zamrudpur, Kailash Colony, New Delhi-110048 Tel: 011 46550555 (Hunting Line) | Fax: 011 46536481/82, 46536498
Email: assocham@nic.in | Website: www.assocham.org
Executive Summary
• The study assesses the impact of rupee depreciation on: The import bill of the country Key import commodities • Rupee depreciation has pushed rupee cost of imports. Rupee cost of imports have increased by Rs. 65999 crore. • Oil Imports in rupee terms have gone up by Rs. 5676.7 crore,eventhough Globalpricesoilhascomedownandasaresultthedollarcostofimports havecomedown. • Theimpact of rupee depreciation on Crude Oil importssuggests: Dollar price of Crude Oil have declined while exchange rate was depreciating. Due to depreciation of currency, domestic price of crude oil has become more costlier. Expenditureonpowerandfuelforindustryhasincreased. The importers have to pay an additional Rs. 489.8 per barrel to import the same quantity of Crude Oil. • Theimpact of rupee depreciation on Thermal Coal importssuggests: The benefit of falling commodity prices is not being transferred to the industryduetorupeedepreciation. Rupee depreciation coupled with an inflexible tariff structure means that the power companies will have to suffer huge losses. The importer has to pay an additional Rs. 684.6 per tonne toimport thesamequantityofcoal. • Theimpact of rupee depreciation on Fertilizer importssuggests: TherehasbeenanincreaseintheglobalpricesofDAPfertilizer.
Rupee Exchange Depreciation: Impact Analysis
1
Thedepreciationofrupeehasfurtheraggravatedthecostpressureson theindustry. Continuous increase in the prices of imported fertilizer can also adversely impact the subsidy burden of the government. The combined effect of a depreciating rupee and an increase in dollar prices has meant that the importer has to pay an additional Rs. 3658.3 per mt. • Theimpact of rupee depreciation on Vegetable oil imports suggests: Global prices have declined by $ 157.6 per metric tonne. However,importcostindomestic currency has increased by Rs 6941.6 metric tonne. Increase in import cost of palm oilincreasesthecostofproductionfor theFMCG industryandputs pressure on their profit margin. • Thesedevelopmentshavemajorimplicationsforindustryandconsumersas itpushesupinflation.
2
Rupee Exchange Depreciation: Impact Analysis
IntroductIon
herupeehasdepreciatedbymorethan18percentsinceMay2011,moreoverwith the rupee breaching the 53 dollar mark, profit margins of companies that import commoditiesorcomponentswouldcomeunderseverepressure,whichcouldresultin priceincreasesfortheconsumer. Therupeedepreciationwillparticularlyhittheindustrialsectorandputhigherpressure on their costs as items like oil, imported coal, metals and minerals, imported industrial intermediateproductsallaregettingaffected. Although the prices of most of the imported commodities have fallen, the depreciating rupeehasmeantthattheimportergetsnorespiteastheyneedtopaymoretopurchase thesamequantityofrawmaterials. Thedepreciatingrupeewouldkeepthepriceofimportedcommoditieselevated.Thusthe industrialsectorisboundtogetadverselyhit.
T
Impact of Rupee Depreciation
Primarily the consequences of weak rupee are to be felt through:
A. Increase in the Import Bill
A depreciation of the local currency results in higher import costs for the country. Failure of a similar rise being experienced in the prices of exportable commodities is going to result in a widening of current account deficit of the country.
B. Higher Inflation
Increase in...
January 2012
The Associated Chambers of Commerce and Industry of India
ASSOCHAM Corporate Office: 1, Community Centre, Zamrudpur, Kailash Colony, New Delhi-110048 Tel: 011 46550555 (Hunting Line) | Fax: 011 46536481/82, 46536498
Email: assocham@nic.in | Website: www.assocham.org
Executive Summary
• The study assesses the impact of rupee depreciation on: The import bill of the country Key import commodities • Rupee depreciation has pushed rupee cost of imports. Rupee cost of imports have increased by Rs. 65999 crore. • Oil Imports in rupee terms have gone up by Rs. 5676.7 crore,eventhough Globalpricesoilhascomedownandasaresultthedollarcostofimports havecomedown. • Theimpact of rupee depreciation on Crude Oil importssuggests: Dollar price of Crude Oil have declined while exchange rate was depreciating. Due to depreciation of currency, domestic price of crude oil has become more costlier. Expenditureonpowerandfuelforindustryhasincreased. The importers have to pay an additional Rs. 489.8 per barrel to import the same quantity of Crude Oil. • Theimpact of rupee depreciation on Thermal Coal importssuggests: The benefit of falling commodity prices is not being transferred to the industryduetorupeedepreciation. Rupee depreciation coupled with an inflexible tariff structure means that the power companies will have to suffer huge losses. The importer has to pay an additional Rs. 684.6 per tonne toimport thesamequantityofcoal. • Theimpact of rupee depreciation on Fertilizer importssuggests: TherehasbeenanincreaseintheglobalpricesofDAPfertilizer.
Rupee Exchange Depreciation: Impact Analysis
1
Thedepreciationofrupeehasfurtheraggravatedthecostpressureson theindustry. Continuous increase in the prices of imported fertilizer can also adversely impact the subsidy burden of the government. The combined effect of a depreciating rupee and an increase in dollar prices has meant that the importer has to pay an additional Rs. 3658.3 per mt. • Theimpact of rupee depreciation on Vegetable oil imports suggests: Global prices have declined by $ 157.6 per metric tonne. However,importcostindomestic currency has increased by Rs 6941.6 metric tonne. Increase in import cost of palm oilincreasesthecostofproductionfor theFMCG industryandputs pressure on their profit margin. • Thesedevelopmentshavemajorimplicationsforindustryandconsumersas itpushesupinflation.
2
Rupee Exchange Depreciation: Impact Analysis
IntroductIon
herupeehasdepreciatedbymorethan18percentsinceMay2011,moreoverwith the rupee breaching the 53 dollar mark, profit margins of companies that import commoditiesorcomponentswouldcomeunderseverepressure,whichcouldresultin priceincreasesfortheconsumer. Therupeedepreciationwillparticularlyhittheindustrialsectorandputhigherpressure on their costs as items like oil, imported coal, metals and minerals, imported industrial intermediateproductsallaregettingaffected. Although the prices of most of the imported commodities have fallen, the depreciating rupeehasmeantthattheimportergetsnorespiteastheyneedtopaymoretopurchase thesamequantityofrawmaterials. Thedepreciatingrupeewouldkeepthepriceofimportedcommoditieselevated.Thusthe industrialsectorisboundtogetadverselyhit.
T
Impact of Rupee Depreciation
Primarily the consequences of weak rupee are to be felt through:
A. Increase in the Import Bill
A depreciation of the local currency results in higher import costs for the country. Failure of a similar rise being experienced in the prices of exportable commodities is going to result in a widening of current account deficit of the country.
B. Higher Inflation
Increase in...
Show More
Please sign up to read full document.
