Falling rupee will keep bond yields at a higher level and may force authorities to raise interest rates—high interest rates can arrest the fall by attracting foreign capital. Higher interest rates will also hurt borrowers. Foreign travel and foreign education expenses will also rise.The eroding rupee is likely to create inflationary pressure in the economy by making imports costlier. “A weaker rupee could affect companies with higher dollar debts, capital-intensive sectors, firms with foreign currency borrowings and those importing raw materials heavily,” says Nigam. At the end of March 2018, the RBI’s total foreign exchange reserves stood at $424.5 billion (around Rs 29 lakh crore).

Source: Economic Times May 28, 2018 00:56 UTC