pay a higher royalty to parent firms. A pressure on margins could also mean firms being forced to cut down production, implying salary cuts and possible retrenchment.
Manufacturers of consumer goods such as soaps, detergents and shampoos, where vegetable oil is a key ingredient, would need to hike prices as input price trends upwards. India imports about 60 per cent of its edible oil requirement; crude palm oil, whose prices generally set the pace for other edible oils, forms a big chunk of it. Pulses, too, account for a substantial chunk of India’s imports, and a weaker rupee will mean the prices of lentils in the market go upward. Electronic consumer goods such as computers, high-end TV sets and mobiles, which have imported components, are likely to be dearer.
Coal & other inputs
For a number of sectors, such as capital goods manufacturers, makers of industrial intermediaries such as tyre cords, and newspaper offices — all of which depend on imports for inputs such as components and newsprint — a falling rupee may force a tightening of costs elsewhere, including possible pay cuts and retrenchment. For sectors such as hospitality, where the cost of services is benchmarked to international levels, a depreciating currency means a lower discretionary spend by potential customers, forcing hoteliers into cost cuts.
Apart from oil and gas, India’s import list includes an increasing amount of thermal coal, used for generation of electricity. A falling rupee increases costs for power generating units, which would pass these on to distribution utilities, finally leading to higher electricity bills for consumers at large.
For a number of firms in the manufacturing sector that had gone in for foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds, a higher value of the rupee progressively escalates the repayment costs. This too would squeeze the margins of these firms, which could respond by laying off manpower or with salary cuts.
For industries that earn in dollars, such as the IT sector, an appreciating dollar would mean greater earnings from its overseas businesses. Families of NRIs remitting money from a foreign country