7/30/2019 10801149_Assignment on BE

1/4

Impact on rise in price of Indian rupee

against us dollar on fertilizer industries

DEFINATION OF FERTILIZER:

Substance aiding plant growth: an organic or synthetic substance usually added

to or spread onto soil to increase its ability to support plant growth.

MEASUREMENT OF INDIAN ECONOMY:The economy of India, measured in USD exchange-rate terms, is the twelfthlargest in the world, with a GDP of US $1.50 trillion (2008).

[1] It has a GDP growth rate of 9.4% for the fiscal year 20062007.[2] However, India's huge population has a per capita income of $4,542 at PPPand $1,089 in nominal terms (revised 2007 estimate).[3] The World Bank classifies India as a low-income economy.

Impact of dollar fluctuations on the Indian economy

Until the 70s and 80s India aimed at to be self-reliant by concentrating more on importsand allowing very little exports to cover import costs. However, this could not last longbecause the oil price rise in the 1970s and 80s created a big gap in Indias balance ofpayment. Balance of payment (BOP) of any country is the balance resulting from theflow of payments/receipts between an individual country and all other countries as aresult of import/exports happening between an individual country, in our case India and

rest of the world. This gap widened during Iraqs attempt to take over Kuwait.

7/30/2019 10801149_Assignment on BE

2/4

Indian rupee appreciation against dollar impacted heavilyto the following:

1. Exporters

Exports from India are of handicrafts, gems, jewelry, textiles, ready-made garments,industrial machinery, leather products, chemicals and related products. Since the 1990s,India is the worlds largest processor of diamonds. The mentioned export itemscontribute substantially to foreign receipts. During the periods when the dollar wasmoving high against the rupee, exporters stood to gain, when $1 = Rs. 48, was gettingthem Rs. 4800 for every $100. Since the beginning of the year 2007, rupee appreciated byabout 10%. With its value of rupee Rs. 39.35 = $1 as on 16 Nov 2007, for every $100,exporters would get only Rs. 3935. This difference is towing away the profit margins ofexporters and BPO service providers alike.

2. Importers

Imports to India are of petroleum products, capital goods, chemicals, dyes, plastics,pharmaceuticals, iron and steel, uncut precious stones, fertilizers, pulp paper etc. With thesame scenario as given for export, if we analyze - an importer is paying Rs. 3935 nowinstead of Rs. 4800 paid during yester years for every $10 This gain on FX is likely tocreate savings in cost, which could be passed on to consumers, thereby contributing tocontrol inflation.

7/30/2019 10801149_Assignment on BE

3/4

3 Foreign investors

Foreign investment into India is also contributing well to dollar depreciation against

dollar. With the recent liberalized norms on foreign investment policy like Foreigninvestment of up to 51% equity limit in high priority industries; foreigners & NRIs areallowed to repatriate their profits and capital with exception for Indian nationals whowere allowed to do so only under special circumstances; allowing free usage of exportearnings to exporters, made foreign investment in India very attractive. It is this favorableatmosphere which made FX reserve surplus in US dollar and helped rupee to appreciate.

RISE IN KUWAIT

In 11\5\2007 Sheikh Salem Abdulaziz Al- Al-Sabah announced a rise in the exchange

rate of the Kuwaiti dinaragainst the US dollar to 289.14 fils/dollar.

Reserve Bank ofIndia:

29 Jul 2008 ... The price of the Indian basket of crude oil increased fromUS $99.4 per barrel.

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4380&Mode=0http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4380&Mode=0http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4380&Mode=0http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4380&Mode=0

7/30/2019 10801149_Assignment on BE

4/4

Oil Pricing in India:

India imports about 76 per cent of its crude oil requirements which amounts to an oil

import bill of around $50 billion every year. Indias crude oil import bill rose by 3.48% inrupee terms and 16.67% in dollar terms during the first half of the current fiscal year. Theappreciation in rupee value by 12.3% this year, the most since at least 1974, has helpedpartially offset the sharp rise in global oil prices.s per the Government, every one rupeeappreciation in the exchange rate of Indian rupee against US dollar will help reduction inthe net oil import bill by around Rs 3950 crore.