Russia’s war on Ukraine has started affecting global economies. The rupee hit an all-time low and was trading at Rs 77 a dollar after Brent crude – the global oil benchmark – surged to settle around $130 after touching $139 a barrel. Incidentally, the prices of crude oil are at the highest level since July 2008, after the US announced that it was discussing a potential ban on Russian supplies to other countries.
At noon on March 7, the rupee was trading at 76.94 a dollar, down 1.03 percent from its previous close. It opened at 76.96 a dollar and touched a record low of 76.97 during the day. Higher crude prices will widen India’s current account deficit, which is likely to put pressure on the domestic currency.
For the unversed, current account deficit is the measurement of a country’s trade where the value of goods and services it imports exceeds the value of the products it exports. A weak rupee or a strong dollar spells good news for exporting segments like pharmaceutical and IT exports. The IT exports from the state now stand at Rs 1.45lakh crore, and a higher-valued dollar will increase it correspondingly.
Due to this, several companies might have better revenues in the coming quarters, though this will impact salaries as they are paid in Indian rupees.
As for the pharma sector, the gains and losses will even out as the revenues secured by exports will be negated by prices of imports. The prices of electronic gadgets are likely to rise as the import costs increase. The impact will be obvious from the next quarter, and this will hinder the growth of the sector.
Tangentially, the dollar-rupee crisis will hit students taking loans for higher education abroad. For example, a student taking Rs 40 lakh earlier will now have to take Rs 45 lakh.