With the rupee closing at 71 against a dollar on Friday, consumers are in for some tough times ahead.

Continued rupee weakness will mean that the prices of most goods — TV set, fridge, cooking gas, washing machine, and general steel products (including utensils), fertilisers, food products, LED bulbs, among other — will go up. So will the fuel bill for your automobile.

However, for those who are exporting from India, it will be beneficial. The rupee has lost almost 10 per cent since the beginning of the calendar year, making it among the worst performers among Asian and emerging markets. In August alone, the rupee lost over 3 per cent.

This puts the Reserve Bank of India, which cannot intervene aggressively, in a sticky situation. A report prepared by Abheek Barua, Chief Economist, HDFC Bank, said the threshold limit (for the intervention) has increased from 69 levels a month ago to around 70.6 now. “For one, after spending around ₹2,500 crore on intervention, the pace of intervention has slowed down...,” it said.

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Effective September 1, consumer durables companies have decided to raise prices by about 2-5 per cent across products on account of currency fluctuations. Most brands have already communicated the new prices to their dealers and distributors. Kamal Nandi, Business Head & EVP, Godrej Appliances, said, “The reduction in prices of consumer appliances by 7-8 per cent in July due to lower GST rates will now be reversed by about 3-4 per cent on account of the strengthening of the dollar as this has put pressure on our input costs.”

Eric Braganza, President, Haier Appliances India, said, “We are hiking prices in the range of 2-5 per cent across products effective September 1.”

For import-driven industries like LED bulbs, the rupee’s weakening increases manufacturing costs by 1.5-2 per cent. Rakesh Zutshi, MD, Halonix Tech, said domestic LED bulb manufacturing is an import-driven industry and the current movement has an impact. However, one must also assess the movement of the rupee against the yuan and other currencies, he said, adding that “most of the imports for LEDs come from China and there will be a reset between currencies other than the US dollar.”

Tushar Gupta, Executive Director, NTL Lemnis, felt that the average cost of imported material in LED Lighting is about 50 per cent; therefore, a 10 per cent fall in rupee will result in a cost increase of roughly 5 per cent.

For the fertiliser sector, the working capital cost of the companies will go up on account of higher prices to be paid for imported natural gas (for urea) and raw materials for potassic and phosphatic fertilisers.

However, there is some good news for oilseed farmers. BV Mehta, Executive Director of Solvent Extractors’ Association of India, said that though the cost of imported edible oils would go up by around 10 per cent (when the dollar was ₹64-65 last August), consumers would not be hit hard as the international prices of edible oils are at rock-bottom.

Abhyuday Jindal, Managing Director at Jindal Stainless, said the company, which is a net importer of raw material, will see an increase in input cost.

Hike in LPG price

Meanwhile, domestic cooking gas prices (LPG) have been increased by ₹1.49 per cylinder (from ₹498.02 in August 2018 to ₹499.51 in September 2018) for subsidised LPG cylinders in Delhi and by ₹30.50 a cylinder for non-subsidised LPG cylinders in Delhi.

With inputs from Meenakshi Verma Ambwani, Twesh Mishra, KR Srivats, S Ronendra Singh, and TV Jayan

 

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