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Kolkata: The Indian rupee has been on a downslide and the acceleration became more pronounced since the outbreak of the US-Iran war. The rupee declined to a new low earlier this week amid escalating tensions between the US and Iran. On May 5, it touched the lowest level of 95.43 against the greenback. Not surprisingly, the decline in the value of the Indian currency has come against the backdrop of a massive rise in crude oil prices — from a level of about $70a barrel to more than $110 a barrel. It immediately raises the demand of US dollar in the market and pushes down the value of the rupee. It also impacts the stock market sentiment adversely. Since India imports close to 90% of its crude oil requirements, any rise in crude oil price hits the Indian rupee since crude oil is almost always paid for in US dollars. The impact, however, extends far beyond the esoteric macroeconomic indicators. Let’s have a look at how its impacts the lives of common Indians.

Which expenses can go up?

The principle to follow is — if the value of the rupee goes down, imports will become more expensive. Even if you don’t import anything, if you buy any item that has imported components, it will become more expensive since the importer has to shell out more rupees for the item. This applies to computers, smartphones, cars, watches, fragrances, cosmetics etc. The point to note is that even if a smartphone is assembled in India, the components can be imported in dollar terms and the manufacturer has to pay more for the eventual product.

Wobbly stock markets

A weak domestic currency also weakens the sentiment in the stock market. Primarily it induces many FIIs (Foreign institutional investors) to sell Indian equities. The reason is simple — the returns become weak when converted into dollars. It immediately drags down the stock market indices and spread a negative mood among retail investors. The sale of equities also contributes to the fall of the rupee and it creates a vicious cycle. Therefore, the value of your portfolio erodes.

Gold becomes more expensive

Since India imports most of its gold — in fact, it is the second biggest item after crude oil on Indian’s import bill — gold becomes more expensive if the value of the rupee goes down. It benefits only those who have purchased gold or jewellery earlier.

Travel, education abroad more expensive

If you want to travel abroad, everything will become more costly. You have to buy dollars with more rupees for air tickets, accommodation, food and anything on foreign land. Overseas education will be more expensive. If you have a child studying abroad and if you have to bear even a part of the expenses, you have to pay more. If anyone takes dollar-denominated education loans, repayments will rise in rupee terms though the principal amount and interest rate remain the same.