If the rupee weakens against the dollar, more rupees will be needed to repay the dollar loan.Īs per the RBI, India's external debt was US$ 620.7 bn at the end of FY22. Thus the principal and interest payments have to be made in foreign currency, usually US dollars. This the debt denominated in foreign currency. It has added to the homegrown inflation and has made the life of the common man difficult. Imported inflation has made its presence felt in the Indian economy. Thus, even if the price of crude oil stays constant in the international market, the cost of petrol will go up if the rupee falls against the dollar.

This makes inflation in India, which is already high, harder to control.įor example, as a country, we can't just reduce our consumption of crude oil. The cost of India's big imports - crude oil, natural gas, minerals of all kinds, machinery, electrical equipment, appliances, chemicals - have all gone up significantly. This means, all imported goods become more expensive. This will be the case even if the volume of imports remains the same. the rupee gets weaker, the cost of imports goes up. As per government data, in financial year 2021-22, India's imports were US$ 610.22 bn and exports were US$ 417.81 bn.Īs the US dollar is the world's reserve currency, it's also the world main invoicing currency for goods and services. Well, there is one very big concern called 'imported inflation'. Politicians are throwing mud at the government.īut the concerns and questions that arise at this time are more important than the knee-jerk emotions in response to the rupee's decline.įirst let's understand the concerns. This has triggered questions, concerns, and emotions.

The rupee is down about 7% versus the dollar this year. The INR fell to a new all-time low of 80 against the USD today.

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