Startup
Start Your Business
Private Limited Registration
Public Company Registration
OPC Pvt Ltd Registration
LLP Firm Registration
Section 8 Company Registration
Nidhi Company Registration
Insurance Company Registration
NBFC Company Registration
Producer Company Registration
Foreign Subsidiary Registration
Foreign Branch Office
Foreign Liaison Office
Foreign Project Office
Overseas Company Registration
Proprietorship Firm Registration
Partnership Firm Registration
Grow Your Business
GST Registration
MSME Registration(UDYAM)
Shop & Establishment Registration
Startup India Registration
ESI/PF Registration
IEC Code (Import Export)
Startup Consultation
Appoint Virtual CFO
Angel Funding/ VCs
Virtual Office Service
Due Diligence of Company
Business Development
Protect Your Business
Trademark Registration
Trademark Objection
Trademark Hearing
Trademark Opposition
Trademark Infringement
Trademark Renewal
Trademark Assignment
Trademark Withdrawal
Trademark Monitoring
Logo Design Service
Copyright Registration
Patent Registration
Exit Your Business
Close Company
Fast Track
Close LLP
Close Firm
GST Cancellation
Compliances
Change Services
Change Company Name
Change LLP Name
Change Company Object
Change LLP Object
Increase Authorised Capital
Increase Paid-up Capital
Increase LLP Capital
Transfer of Shares
Alteration in MoA & AoA
Resignation of Auditor
Appointment of Director
Resignation of Director
Change in Designation of Director
Shifting Registered Office of Company
Shifting Registered Office of LLP
Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
Annual Return of Deposits
Half Yearly MSME Return
Statutory Registers & Minutes
XBRL Filing of Companies
eStamping of Share Certificates
Dematerialisation of Shares
RBI FEMA Compliance
GST Returns Filing
ESI-EPF Returns Filing
TDS Returns Filing
Change in Structure
Proprietorship to OPC
OPC to Private Limited
Private Limited to OPC
LLP to Private Limited
Private Limited to LLP
Partnership Firm to LLP
Private Limited to Public Company
Public Company to Private Limited
Trust/Society to Section 8 Company
Existing Company to Section 8
Existing Section 8 to Company
Services
Accounting & Book Keeping
GST Compliance
Valuation Services
Corporate Litigation
Company Law Advisory
Services For Banks
Drafting & Vetting Services
Business Setup Advisory
Startups Funding
Business Loans
Get in Touch
Govt Liaisoning
Retainership Services
NBFC
NBFC Company Registration
NBFC Micro-Finance Registration
NBFC P2P Lending Registration
NBFC Core Investment Company
NBFC ROC Compliance
NBFC RBI Compliance
NBFC License Restoration
NBFC Business Plan
NBFC Acquisition
NBFC Consultancy
NBFC Compliance Calendar
NBFC Independent Director
ISO
ISO 9001:2015
Most Demanded
ISO 14001:2015
ISO 13485:2016
OHSAS 18001:2007
HACCP Certification
CE Marking
GMP Certification
CMMI Level 3 Certification
ISO 22000:2005
ISO 27001:2013
FSSAI
FSSAI Registration
FSSAI State License
FSSAI Central License
FSSAI Registration Renewal
FSSAI License Renewal
FSSAI Returns Filing
FSSAI Compliances
FSSAI Consultancy
ITR
Salaried Person
TDS Refund
Firms/LLPs
Companies
NGOs
Income Tax Notice
Income Tax Planning
Income Tax Litigation
Income Tax Computation
Charity
Section 8 Company
Recommended
Trust Registration
Society Registration
80G & 12A Registration
FCRA Registration
NITI Ayog Registration
CSR-1 Registration
CSR 2 Report
CSR Services
NGO Consultancy
NGO Handholding
Govt Grants Support
Partnership
Angel Investors
Venture Capitalists
Co-Working Spaces
Banks and NBFCs
Incubation Centres
Government Wings
Institutional Bodies
Software Companies
CA/CS/CMA/Lawyers
Press & Media Houses
Overseas Ventures
Other Startup Enablers
Contact Us
Home
Editorial Box
How a falling rupee can impact your business in 2023.
How a falling rupee can impact your business in 2023.
Volume
1
Rate
1
Pitch
1
How a falling rupee can impact your business in 2023.. Yesterday, the Sensex crashed a whopping 928 points. This month, the rupee fell to INR 82.7 per dollar. In a world of volatility, a weakening rupee is not all bad news for a business. In this explanatory article, Compliance Calendar traces recent causes of a weak rupee and sectors which are favourably disposed to gain from it.Weakening Rupee : A strong indicator of inflationInflation, to put simply, is an increase in prices. A weaker rupee means that more money goes out for every payment involving foreign currency. The major items that get affected are crude oil payments (which are made in dollars), interest payments on loans taken from foreign banks, imports and salaries to workers abroad. This depreciation of money is a strong indicator of inflation in the economy.As the value of the rupee falls, every sector in the economy gets affected. Governments and businesses find loans more expensive, price of fuel increases and consumers find fruits, vegetables, and food more pricey. This triggers a general price rise in the domestic market, impacting personal and corporate finance while adding to inflation. The Adani saga, losing the tag of fifth-largest economy and the rupee weakening India, in September 2022 had overtaken the United Kingdom to become the world’s fifth largest economy, with a growth rate of 7%. IMF calls us a “bright spot in the world economy”, and India alone is set to contribute 15% of the global growth in 2023. Yet, in February, 2023 -UK overtook India again. Experts believe that the Adani-Hindenburg report led to a market capitalisation crash (eroding an estimated $100 billion value from the group), adding to an already weak rupee and loss of international investor sentiment. In this backdrop, one might wonder, why is the rupee falling? This is because of a combination of multiple factors.• The Russia - Ukraine war adding volatility to oil prices • In 2022, the US Federal Reserve (think of it as USA’s RBI) raised the interest rates, thereby increasing returns for investors. This led to a flood of investors flocking investments in the USA, by exiting the Indian stock and debt markets. • Foreign Institutional Investors sold stocks worth over INR 1.2 lac crores in 2022. This was also one of the reasons why our stock market has been very volatile in 2022. • 2021 will go down in history as the year of Initial Public Offerings (a term which refers to raising new money from the market for the first time), when equity and debt fundraising reached an all time high. However, the year 2022 witnessed a slowing outlook towards initial investments in IPOs. • Higher imports : When imports exceed exports, we land up in a situation called trade deficit. This means, we owe more money to other countries than we receive from them. Thus, we require more dollars to settle the payment. This increase in demand for dollars weakens the rupee, and makes payments even more expensive. Profiting from the weakening rupee - The positive impact on business and economy The rupee is depreciating. But there’s good news for many businesses. Any business with a revenue stream coming from the US which is negotiated in dollars gets a huge boost every time the rupee weakens. India has become a leading exporter of services in segments like IT, software technology, chemicals, pharmaceuticals, gems and jewellery etc. So, every time the value of the rupee falls, the value of the dollar increases. Thus, bills and receivables denominated in dollars get a thrust. • Companies like Infosys, TCS and Wipro - get more than half their earnings from service exports. Thus, any fall in rupee brings greater income to the export based IT service sector.• Chemicals, plastics, dyes, synthetic rubber, agrochemicals, pesticides etc, of which India is a leading exporter also record a gain from weakening of the rupee. • India, now regarded as “pharmacy of the world” profits when dollar prices increase vis a vis rupee, on its generic medicines, vaccines and other health related exports. • Regardless of the sector, any company that is a net foreign exchange earner records a positive cash flow due to a falling rupee. • The weakening rupee also has societal benefits - it makes our exports competitive, as foreign firms find a weaker (or cheaper) rupee more lucrative. This increases exports and helps narrow the trade deficit. A more expensive loan/shopping experience abroad also means that domestic investors are discouraged from overspending on foreign goods, and are steered towards Indian alternatives. Which businesses are the worst affected? When the rupee starts depreciating, any industry which is highly dependent on imports is likely to face huge losses. The imported raw material, machinery and logistics payments in international trade become expensive. Take for instance, India’s automobile industry which has consistently faced losses in the last few years. During Covid, when semiconductors (an essential component in car manufacturing) shortage coincided with a weakening rupee, the automobile sector’s growth rate fell to 1.5% (from a CAGR of 12%), daily losses reached around INR 2600 crores and lacs of employees lost their jobs. Similarly, electronics and hardware, engineering goods, coal and other heavy industries relying on foreign goods as part of the industrial process are adversely affected. Guarding against inflation : Should you invest in Inflation Indexed Bonds? In India, the RBI issues an instrument called Inflation Indexed Bonds. These are government securities and debt instruments that do what their name suggests - adjust their returns for inflation. They guard the interest received, by providing a formula (linked to the Wholesale Price Index) that accounts for inflation. This helps middle class and small investors in preserving their investment. A retail investor can participate in bidding of these bonds through primary dealers and banks. A gilt account with the bank or demat account is a prerequisite for such participation. While these bonds are a great way to keep your interest income shielded from inflation, the earning potential of such bonds is often low. The formula adopted for inflation calculation is also not a perfect metric, and hence may not truly adjust for real inflation in all sectors. Financial planning for your business against the risks of inflation and currency fluctuations is a crucial decision for every entrepreneur. Connect with our experts at Compliance Calendar to get the best of advice for safeguarding your profits from market fluctuations.
Share this article:
Search more articles:
You may also like
Areas of Startup Consultation and Need of Professionals
Role of MSME in the Indian Economy and Various Govt Schemes: Let us comprehend
Know why your business should embrace technology
10 Ways to make time for your side hustle and also make money
How Automation will change the work that we do
Future of FinTech Companies in Indian Perspective
How to make Extra Money while you are still a Student
Impact of GDPR in Business Privacy Policies
What Strategies can your Business adopt for Marketing in a Post-Covid World?
How GST has Become a Turning Point for SMEs of India?
SEZs: Should you relocate your business to a Special Economic Zone?
A growing Indian sports market - here's what it means for businesses
Financial hacks for your early stage business to explore this year in 2023
What India’s G20 Presidency means for Business in India
India’s unique success in digital payments - Here’s how your business benefits
Major Mergers - Zee-Sony and PVR-Inox, tracing the significance of M&A deals on business
Angel Investment Guide - A new asset class and portfolio for HNI/ SME Owners
What are the modes available for investment in a Startup Company?
FCRA License suspension - The why, how, and the way out
ESOPs for Employees: What It Is, How It Works and Advantages
Reduction in Basic Customs Duty in Budget 2023 - does your business benefit?
How solar energy startups are heating up India's business landscape
India as a drone manufacturing hub - Possibilities, Compliances and Challenges
What is the ASPIRE Scheme for MSMEs?
Sweat Equity Shares: A Comprehensive Guide for Entrepreneurs and Investors
Top Schemes Every Eco-entrepreneur should watch out for
Understanding Convertible Notes as an Investment in Startups
India's New Foreign Trade Policy for Export and Import
Phantom Stock Plans for Employee Compensation & Retention
North East Startups- Top Schemes for MSMEs and Entrepreneurs
Green Financing in India- Opportunities, Challenges & Regulation
Start Your Business
Private Limited Registration
Public Company Registration
OPC Pvt Ltd Registration
LLP Firm Registration
Section 8 Company Registration
Nidhi Company Registration
Insurance Company Registration
NBFC Company Registration
Producer Company Registration
Foreign Subsidiary Registration
Foreign Branch Office
Foreign Liaison Office
Foreign Project Office
Overseas Company Registration
Proprietorship Firm Registration
Partnership Firm Registration
Grow Your Business
GST Registration
MSME Registration(UDYAM)
Shop & Establishment Registration
Startup India Registration
ESI/PF Registration
IEC Code (Import Export)
Startup Consultation
Appoint Virtual CFO
Angel Funding/ VCs
Virtual Office Service
Due Diligence of Company
Business Development
Protect Your Business
Trademark Registration
Trademark Objection
Trademark Hearing
Trademark Opposition
Trademark Infringement
Trademark Renewal
Trademark Assignment
Trademark Withdrawal
Trademark Monitoring
Logo Design Service
Copyright Registration
Patent Registration
Exit Your Business
Close Company
Fast Track
Close LLP
Close Firm
GST Cancellation
Change Services
Change Company Name
Change LLP Name
Change Company Object
Change LLP Object
Increase Authorised Capital
Increase Paid-up Capital
Increase LLP Capital
Transfer of Shares
Alteration in MoA & AoA
Resignation of Auditor
Appointment of Director
Resignation of Director
Change in Designation of Director
Shifting Registered Office of Company
Shifting Registered Office of LLP
Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
Annual Return of Deposits
Half Yearly MSME Return
Statutory Registers & Minutes
XBRL Filing of Companies
eStamping of Share Certificates
Dematerialisation of Shares
RBI FEMA Compliance
GST Returns Filing
ESI-EPF Returns Filing
TDS Returns Filing
Change in Structure
Proprietorship to OPC
OPC to Private Limited
Private Limited to OPC
LLP to Private Limited
Private Limited to LLP
Partnership Firm to LLP
Private Limited to Public Company
Public Company to Private Limited
Trust/Society to Section 8 Company
Existing Company to Section 8
Existing Section 8 to Company
Services
Accounting & Book Keeping
GST Compliance
Valuation Services
Corporate Litigation
Company Law Advisory
Services For Banks
Drafting & Vetting Services
Startups Funding
Business Loans
Get in Touch
NBFC
NBFC Company Registration
NBFC Micro-Finance Registration
NBFC P2P Lending Registration
NBFC Core Investment Company
NBFC ROC Compliance
NBFC RBI Compliance
NBFC License Restoration
NBFC Business Plan
NBFC Acquisition
NBFC Consultancy
NBFC Compliance Calendar
NBFC Independent Director
ISO
ISO 9001:2015
ISO 14001:2015
ISO 13485:2016
OHSAS 18001:2007
HACCP Certification
CE Marking
GMP Certification
CMMI Level 3 Certification
ISO 22000:2005
ISO 27001:2013
FSSAI
FSSAI Registration
FSSAI State License
FSSAI Central License
FSSAI Registration Renewal
FSSAI License Renewal
FSSAI Returns Filing
FSSAI Compliances
FSSAI Consultancy
ITR
Salaried Person
Firms/LLPs
Companies
NGOs
Income Tax Notice
Income Tax Planning
Income Tax Litigation
Charity
Section 8 Company
Trust Registration
Society Registration
80G & 12A Registration
FCRA Registration
NITI Ayog Registration
CSR-1 Registration
CSR 2 Report
CSR Services
NGO Consultancy
NGO Handholding
Govt Grants Support
Partnership
Angel Investors
Venture Capitalists
Co-Working Spaces
Banks and NBFCs
Incubation Centres
Government Wings
Institutional Bodies
Software Companies
CA/CS/CMA/Lawyers
Press & Media Houses
Overseas Ventures
Other Startup Enablers
Contact Us