The impact of the rupee?s fall continues to take a toll. From essentials like food items and education to entertainment and vacations abroad, inflation has been pinching the common man for nearly a year now. Rough estimates indicate that an Indian household spends 10-15% more as a fallout of the currency?s depreciation. As the trend is likely to continue to affect your lifestyle, it?s time to know and gear up to adapt to the changing scenario.

Imported consumables

The weakening rupee has made crude oil, fertilisers, medicines and iron ore, which India imports in large quantities, costlier. This has had a direct impact on our day-to-day budget. A weak rupee also influences petrol and diesel prices, which will again have a direct impact on our household budget. The other visible impact of the rupee’s fall on our daily life is by way of an increase in prices of fast moving consumer goods, like edible oil, pulses, detergents, soaps, shampoos and deodorants, which contain chemicals that are by-products of crude oil. Other things that will be affected in a big way, thanks to the falling rupee, are packaged premium food products, olive oil, gourmet cheese, high-end furniture, consumer durables and apparel that are imported.

Foreign education

Keen on education abroad, Indian students will have to think twice before moving ahead. The decline in the rupee means they’ll have to shell out more for tuition fees, food, stay and other expenses. It is expected that students going abroad for education will have to manage with at least 10-15% rise in the costs. This is because the expenditure is in foreign currency and the borrowing in Indian currency. For example, suppose the total fee is $1,00,000. In this case, earlier a student had to shell out about R45 lakh. Now, after the depreciation in the rupee, the cost comes to R52-54 lakh, depending upon the exchange rate.

Those who have opted for loans to fund their foreign education will have to bear a higher loan burden. Higher education expenses will affect the family budget as well.

Impact on employees

Industries dependent on imports will have to face an increase in cost of production and operations. Companies facing such a scenario will naturally try to balance out their costs through an internal cost control by trimming the number of employees or keeping the pay checks constant or reduced.

However, it is a good time for industries that earn in dollars, especially for the IT sector which stands to gain, unless of course the global recessionary conditions set off the impact.

Impact on auto industry

Most of the automobile companies in India are dependent on overseas partners for components. So, depreciation of the rupee will impact them considerably. Some companies will have to pay a higher royalty fee to their foreign parents. Also, there are a few companies which have foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds, which means almost all auto companies will have to hike prices at least by 2%.

Impact on electronic consumer goods & foreign food chains

Electronic consumer goods such as computers, televisions, mobile phones, etc, which have imported components, will become costlier. International food chains, which run outlets in India, say there would be a significant impact on their profits and if the trend continues the burden would be passed on to customers.

Foreign vacations

The cost of traveling by air is already on an upward spiral thanks to the increase in fuel surcharge. Foreign accommodation, shopping, as well as eating out are expected to be costlier by at least 3-5%.

In this case, the impact is seen in the way holiday destinations are planned. More attraction is now expected to be towards domestic or non-dollar destinations like the Gulf countries, Sri Lanka, Dubai, Bali and Phuket.

Also, travel insurance will cost more as covers in this case are denominated in US dollars. This would in turn result in an upward revision of premiums. However, as many people make travel plans in advance, holiday packages booked before the rupee plunged would see no impact.

Who would gain?

However, on the flip side, there are some who might actually stand to gain from this slide in the rupee. These include NRIs, foreign exporters, hospitality industry as well as investors in gold and international funds.

While most segments of the community are trying hard to make both ends meet, a select few have reasons to not be unhappy. From an overall perspective however, it is time to be selective about purchases so that your consistent savings month on month are not impacted. For most, it could be time to revise the budget and cut down on quite a few expenses. Plan ahead or change your options wisely.