The Falling Rupee :-Meaning,Reason & Impact

The rupee is hitting a fresh low everyday putting RBI and economy under pressure.The rupee, which is the worst performer among emerging market Asian currencies,has depreciated close to 2% against the dollar in this month so far.
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What the rupee's fall means :
Importers are hit,exporters have gained,foreign holidays and education abroad are costlier.With international crude prices rising and India's trade deficit widening, the economy is badly impacted.

Why has the rupee been falling ?
There are 3 major reasons-

• Global crude oil prices are on a upswing,fueling concerns over India's current account deficit & inflation risks. 'Rising crude oil prices are a drag on the Indian economy & fuel inflation concerns, as it is a major driver of our current account deficit. India imports around 80% of its crude oil requirement & higher crude oil prices risks widening India's current A/C deficit & adding inflation risks.
• Global oil prices have gained as US put pressure on its allies to halt purchase of Iranian supplies.
• Overseas investors have pulled out nearly $7 million from Indian debt & equity market since the start of this year.Expecting US interest rates to go up further, FPIs (Foreign Portfolio Investment) will prefer to invest in their home country as the arbitrage gain while investing in India and emerging markets will decline.

What is the Impact ?
  To YOU-

• A weak rupee makes overseas travel costlier.
• Imported goods like computer,mobile phones & crude oil will get costlier
• It will promote oil companies to hike petrol & diesel prices
• Costlier transport fuel will knock up prices of most goods & stoke inflation
• Elevated inflation will promote RBI to raise lending rates
• It will also keep interest rate high to maintain India's attractiveness as a debt market 
• High interest rate will push home loans EMI
• Domestic tourism could grow as more tourist will visit India since their currency now buys more here.

To Inflation-
One of the first visible effects of currency depreciation is the country's import becomes more expensive & exports cheaper.The reason is simple. It takes more rupee to pay for the same quantum of imports & fewer dollars for a buyer to pay for the same quantity of exports.
More expensive imports are likely to drive inflation upward, especially in India where input products constitute a large part of our inputs.

To GDP-
Costlier inputs & the subsequent increase in the prices of finished goods will have a positive impact on GDP. But the consequent decrease in demand due to higher price will nullify it.