Hyderabad: The industry could be severely impacted by the Indian rupee’s declining trend, particularly production segments where imports play a significant role.
Devendra Surana, a former president of the Federation of Telangana Chambers of Commerce and Industry, claims that this is because the rupee, which is poised to hit 82 units to the dollar if the decline continues, could lead to an increase in industrial production costs, particularly in the automotive, electronics, hardware, and other segments where import dependency is high.
Most nations struggle with currency depreciation, and many struggle greatly with inflation. “The price impact is significant even when some imports, like plastic, are made in modest numbers. Prices in industries that use copper, zinc, and aluminium will change, he predicted.
Large importers and borrowers typically hedge 50% to 70% of the value. However, buyers pay an additional 3-3.5% for the hedging. Early in the year, the dollar was either constant or even decreased. The hedge mechanism is ineffective in these circumstances since the buyers are paying the agreed-upon price. The dollar might climb to new highs, as it is now doing, Surana warned, outlining the risks of not taking a hedging.
“Recently, oil prices have weakened. More swiftly than the currency depreciating will be an influence from the cooling of oil prices. In the US, interest rates are rising. Prior to this, there was a 5% rate differential; currently, there is a 2.5% difference. The strengthening of the dollar is caused by this. The next six months are likely to see it continue, he predicted.
The Indian rupee declined last week. After the US Federal Reserve raised rates by 75 basis points, the third-largest rate increase this year, and signalled higher rate hikes, the currency declined. The Indian rupee has suffered as a result, along with other Asian currencies.
