The rupee, its fall, slight recovery and what the RBI did
₹83.5 against the dollar. It has now recovered a little, closing at ₹83.1 on 15 November. Mint explains the reasons behind the rupee’s slide in the recent past and gives a peek into the future.
On 3 January 2022, one dollar was worth ₹74.3. On 15 November, it was worth ₹83.1, implying that the rupee has lost close to 12% against the dollar. This fall in value hasn’t been linear and the value of the rupee against the dollar has moved up and down during the period, as is the case with any currency which is on a largely flexible exchange rate system.
Of course, the Reserve Bank of India (RBI) intervenes in the foreign exchange market—as it most probably did on 10 November and has possibly done since then too. The intervention is to ensure that the value of the rupee doesn’t fall too quickly. A fall in the value of the rupee tends to benefit exporters given that they earn more rupees for every dollar they earn.
Of course, like everything else in economics, there is a flip side as well. A weaker rupee means imports become more expensive in rupee terms. Now, India imports a very large chunk of the oil that it consumes.
Data from the Petroleum Planning and Analysis Cell suggests that from April to August, 87.8% of the oil consumed was imported—against 86.5% during the same period last year. This dynamic forces the RBI to sell dollars and buy rupees in order to slow down the depreciation of the rupee. A higher price of oil in rupees typically means a higher price of petrol, diesel, cooking gas, kerosene etc.
Of course, lately the government has managed the price of these retail-facing petroleum products and thus inflation. Nonetheless, someone has to pick up the tab for this in the form of losses or lower profits. And that is
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