• Exchange rate impact on Import Industry

    Exchange rate (mainly USD: INR) has significant impact on the import and export industry and its current value drives the growth in those particular segments and decides the profitability of the main players involved. To understand the main impact on import industry, we have to first understand how the import players use exchange rate.

    For import, the players or the companies first sell the Rupees and buy dollars in the money market to pay the foreign exporters for the imported goods or articles. For them, the favorable situation will be Rupee appreciation, in which they will spend less amount of Rupee to buy the same amount of US dollar, which helps the importer to increase profitability.

    Suppose for a crude oil importer the global crude oil price is USD 100 per barrel and the current exchange rate is Rs 45 per USD, so its import bill will be Rs 4,500 per barrel. If the rupee appreciates and exchange rate becomes Rs 44 per USD after one month, then import bill will be Rs 4,400 per barrel. So there will be Rs 100 direct profit for the importer just because of the favorable exchange rate change. At the same time too much of Rupee depreciation hurts the importers severely.

    Because of these reasons, the Indian importers want higher rupee compared to other currencies to gain the profit while doing currency conversion. The main importers inIndiaare Oil marketing companies (import Crude Oil), Steel producer (import coal and other raw materials) and auto makers (import different parts).

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