You need a strong exporting economy to tackle the rapid fall in the exchange rate and steep rise in oil prices.
The exchange rate measures the value of the dollar. It dropped to Rs 74 this week. India needs dollars to pay for the import of crude oil. Oil prices have been steadily climbing and are nearly double of what they were last year. We may need over $120 billion to pay for the oil alone. That’s Rs 8.5 lakh crore. Every extra rupee that we pay per dollar, i.e. if we have to pay 75 instead of 74, the oil bill goes up by Rs 120 billion, which is Rs 12,000 crore.
The exchange rate has slipped from 63 to 74 in the past 10 months. Imagine the extra burden for oil payment due to the exchange rate alone. Add to that the fact that oil prices have gone from $50 to $85 per barrel. This has to come out of your pockets or from the government’s kitty (basically the money of taxpayers, which is all of us)