Experts say that this year the rupee may weaken against the US dollar.

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Experts say that this year the rupee may weaken against the US dollar.

  • The Government of India has to ensure that it maintains a balance between welfare donations and expenditure and creates ample income opportunities.
  • Efficiency in managing the performance of the rupee against U.S. Dollar This will be an important factor in keeping inflation and expenses under control.
  • Ahead of Budget 2022Business Insider spoke to experts to understand the outlook for the rupee against the US dollar.

Budget 2022 is almost here and managing the fiscal balance is one of the major challenges that the Government of India and its Finance Minister will have to deal with. And the performance of the rupee against the US dollar is a major factor in this wheel of fiscal balance.

Experts Say That This Year The Rupee May Weaken Against The Us Dollar.
The performance of the rupee against the US dollar in the last five yearsBusiness Insider India

why did you ask that? The reason is simple – a large part of India’s foreign trade and debt is of US dollar denomination. This means that whenever India imports goods and services into the country, it has to be paid in dollars. Similarly, he has to repay the foreign debt and the interest thereon in dollars also.

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With Budget 2022, experts remain cautious and suggest that the rupee will weaken further against the US dollar this year.

“A larger [market] There is no chance of an accident. Major crashes occur when returns exceed the trend line. And that doesn’t seem to be happening at the moment. Rupee depreciation is a risk,” Devina Mehra, founder, First Global told Business Insider.

However, Nilesh Shah, managing director of Kotak Mahindra Asset Management Company, points out that devaluation of the rupee is not really a bad thing. “My recommendation is that instead of predicting where the rupee will go, let the market decide,” he said. The market will know what is the fair value of the rupee,” Shah told Business Insider.

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“Depreciation of 2-3% of rupee every year is necessary to maintain our competitiveness,” he further said, referring to the fact that rupee depreciation helps in making Indian exports attractive.

Rupee Weak Against US Dollar – Is It A Good Thing?

It is a simple concept and here is how it benefits the exporters:

If you exported goods or services worth $1,000 at an exchange rate of ₹70 per dollar, you would be entitled to ₹70,000 in total.

Now, if the rupee depreciates against the dollar and falls to ₹74 per dollar, you will be entitled to a receipt of ₹74,000. This is a profit of ₹4,000 purely on account of the change in the exchange rate.

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However, this becomes a disadvantage when we import goods and services as payments are mostly made in US dollars. In December 2021, India’s trade deficit stood at $21.7 billion, meaning that we imported goods and services worth $21.7 billion more than we exported.

See all:

Budget Expectations 2022: Why Income Tax Slabs May Not Change This Year

From Rationalizing Tax Structure to Expansion of EV Charging Infrastructure, This Industry Wants From Budget 2022

Budget 2022 Expected: Why India Needs Urban MGNREGA

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