Re fall making Indian exports competitive
But currency depreciation has fuelled inflationary pressures: Experts
image for illustrative purpose
New Delhi: Rupee depreciation has impacted the current account deficit (CAD) and fuelled inflationary pressures, but at the same time it has made Indian exports more competitive, according to experts.
The Indian rupee has been depreciating against the $dollar and is nearing the psychologically key mark of 80, making imports expensive.
"The depreciation of the rupee has multiple impacts on the economy. Given we have a negative trade balance, though a depreciation of the rupee makes our exports more competitive, our import bills go up significantly. It has an impact on the current account deficit thus further putting pressure on the rupee as well as imports inflation too as the price of imports in rupee terms is higher," said Ranen Banerjee, Leader, Economic Advisory Services, PwC India.
A recent report by the finance ministry cautioned that India's current account deficit (CAD) is expected to deteriorate in the current fiscal on account of costlier imports and tepid merchandise exports. Primarily driven by an increase in the trade deficit, the CAD stood at 1.2 per cent of GDP in 2021-22.
