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How the rupee fall against US dollar affects an Indian home

How the rupee fall against US dollar affects your budget
Usual discussions on the fall in the rupee bring up macro-economic matters such as slowing economic growth, corporate earnings and market volatility. However, the woes aren't restricted to corporate corridors or the Dalal Street. For the common man, the falling rupee is going to hit where it hurts the most-the pocket.

From essentials such as food and education to foreign vacation and the swanky gadget you plan to buy, the falling rupee will hurt you in more ways than one.

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High inflation has been pinching you for more than a year now. Now, the weakening rupee has made crude oil, fertilisers, medicines and iron ore, which India imports in large quantities, costlier. Though these items are not for your daily consumption, they impact your finances indirectly. 

For instance, since India depends on imports for a large part of crude oil it consumes, a weak rupee will influence petrol and diesel prices. "Fuel being directly connected with the cost of transportation, prices of goods that are transported from one part of the country to another, such as food, are bound to rise. This will have a direct impact on the household budget," says Paresh Parekh, Tax Partner, Ernst & Young.

FMCG, or fast moving consumer goods , such as soaps, detergents, deodorants and shampoos, of which crude oil is an input, are likely to become more expensive. 

"The impact of rupee depreciation on the FMCG sector will be due to higher cost of imported raw materials. The companies were already facing cost pressures. The rupee depreciation has added to their woes. They will have to revise prices. Hindustan Uniliver and Procter & Gamble have already taken steps in this direction. Many others will increase prices in the coming months," says Kaustubh Pawaskar, FMCG analyst, Sharekhan.

Pulses and oil, which account for a large part of India's imports, will also be affected. "Crude palm oil prices set the pace for prices of other edible oils. It is imported in large quantities and any rise in its price will add to the inflationary pressure," says Arvind Chari, fund manager, fixed income, Quantum Asset Management. 

"The depreciation of the rupee has considerably affected the price of the edible oil complex in a big way, as we import 60-70% of our requirement. For instance, in November-December 2011, the price of refined soya oil shot up by Rs 75 per 10 kg from Rs 651 to Rs 724," says Hanish Kumar Sinha, head, trade and commodity intelligence group, NCMSL. Sinha expects that refined soy oil will test the Rs 800 per 10 kg level by April.

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