Now the oil does not grow here. We buy from countries like Saudi Arabia, Iran, and Kuwait. They have to pay in dollars. Why? Because the cost of crude oil supplied to the world is fixed in dollars. Why? Because the dollar is the international currency. This is the currency of the US. America is considered a stable country that suddenly there will be no such financial problems that the entire country will be separated. That is why the dollar is considered a stable currency. Most of the countries take payments in dollars. We also make oil payments in dollars.
Now suppose that one dollar in the US last year was equal to 65 rupees and one drum of crude oil was $ 100. So we had to pay $ 100- Rs. 6500 to buy a drum crude oil. This year the dollar went up to 71 rupees and crude oil drum also went up to $ 110. So now we have to pay 110 dollars i.e. 7,810 rupees to buy a drum oil.
So what happened last year was Rs 6,500, it was Rs 7,810 this year. Oil will come from abroad, refine, governments will tax, the dealer will take commission ... then the oil on the petrol pump will be expensive. And where does this increased money go from? From Your Pocket
This is the oil fund. Now you will ask why this dollar is about 71 rupees!
There are three reasons for the rupee to weaken against the dollar:
# 1. Trade war
In the United States, the trump is unclear, they have gone to some countries. Now, these are not 1945, then say that they will beat with money. First of all, he took the target to Turkey. He put a lot of economic sanctions on it. Now, what happens in this is that a shirt made in Turkey was sold in the US. Upon landing in the US, import duty on that shirt will be charged. Suppose that the cost of the shirt was Rs.550 with the duty of 50 rupees. Now, what did Trump Ankle do to increase the import duty to 300 rupees to teach turkey a lesson? So the cost of the shirt is 800 rupees. While in the US the shirt already made in the US is selling for 500-600 rupees.
Donald-trump
What will happen now that people buy cheap shirts made in the US instead of buying expensive shirts in Turkey? This is the loss of turkey. When his things will not be sold, he will have less money. If money will be reduced, then the path of business will be reduced. If this happens, foreign investors will run away from Turkey.
Now the issue is that turkey comes in countries of the world, which are called big investor emerging countries. That is the country where the business is flourishing rapidly. India also comes in this category. But as the trade war spreads between countries such as America, China, Iran, and Turkey will increase, foreign investors, will start fleeing from emerging countries, because the business will be at risk of early halt. He will go to developed countries like America because the business will not be easily closed. And what will happen ... this is happening, whose impact is also on India. Many countries have to curb their currency in this trade war affair.
#2. So how will the rupee weaken by going away from investor
Because all investors buy dollars by selling dollars and then invest only. Think of it that in 2016 a foreign investor came to invest in India. He felt that the government was going strong and the business was also flourishing, then invested. He made an effort to invest $ 100. To invest in India's market, it will have to buy dollars by selling dollars. They will buy $ 100 and buy the money.
Then in 2018, he saw that the trade war is on the rise and the elections are going to come. Do not know whether the market will be able to give the benefit or not. The next government also did not know who made it. So he decided to withdraw money. To do this, he will have to buy dollars by selling the rupees. So when you buy dollars by investing a lot of investor rupees, then the rupee will be supplied in India's market. And you know the rules of demand and supply. If demand will be high, then the price will rise. If the supply is high, the price will fall.
# 3 Interest rate of US Reserve Bank
Yes Yes ... There is also the Reserve Bank in America. But its name is not the Reserve Bank, but the Federal Reserve Bank. In the present time, he has increased the interest rates in his country. Increasing interest rates is still more beneficial in the US, therefore demand for dollars is increasing worldwide. So the businessmen who were still putting money in India are now taking their money out of India and putting them in the US.
Now the people who took the money, they changed the dollar to Karke. According to mathematics, between April and June 2018, 9 billion dollars were withdrawn from India. Something went unnoticed in July, so nothing came. By August 29, the figure of $ 1 billion was revealed, but it is not enough to do anything for our money. Now when so many dollars went out of the country, then the same demand-supply rule. Dollar demand is high, so it's expensive. If the dollar is expensive, then the value of rupees is declining.
Now you will say that when everything is going to be done by itself, then what is this government made for the pakodas to be framed? Can the government not lower the price of oil and value the rupee more? Come on, they also tell.
#A. Why can not the government reduce the price of oil?
Because the retail price of oil is fixed on three things:
1. Crude oil in the international market: which is still going on more than 2014-15
2. Petrol-Diesel Price in the International Market: There has been a decline in the past few times, but it is still faster
3. The position of the rupee: which is very shaky
Now what is the cost of crude oil or petrol-diesel in the international market, there is no emphasis on the Government of India nor can it be. Because the price of crude oil is determined by the country selling oil and their association. The demand-supply rule also applies to this. Now suppose that Iran will not be able to sell oil after the US ban, then India will have trouble supplying oil. So, the country which sells this crude oil, at the rate the oil will sell, we have to buy at the same rate.
Think of it also that May was the month between April and August 2018 when the cost of crude oil was the highest - $ 75 or about 5,100 rupees per barrel. Now the price is moving around 73-74 dollars or around 5,254 rupees per barrel. You would say that the difference is only 1 dollar. so listen. According to an estimate, when the cost of crude oil increases to $ 1, India's import bill on the next purchase increases by more than $ 350 million (i.e. 35 billion rupees). So, when the government has to pay the import bill more, we will have to pay a higher price for the oil. We can not do anything in this or the government.
It is a matter of rising price of crude oil It becomes scabbed in leprosy when crude oil becomes expensive and the rupee weakens. The lesser the rupee, the import bill will increase because the payment is made in dollars only.
#B Why can not the government strengthen the price of the rupee against the dollar?
How will 1- If foreign investors in the country will not make new investments 2- Those who have already done, they will also be removed. 3- And we have to continue paying abroad for the dollar continuously. So this will reduce the dollar in the country. The lower the dollar amount, the value of the rupee will fall as much.
Our Reserve Bank has a foreign exchange fund. The objective of this fund is that when the amount of dollars in the country is greatly reduced and rupee depreciates, then RBI will take away the dollar from the Foreign Exchange Fund and give it to the market. But how long will the RBI? Anyway, this fund has been created for the situation that if the economy is on the verge of being flat, then RBI will get a huge amount of dollars from this fund. Now, the condition of the rupee that has remained, cannot empty the foreign currency funds to decorate it. Anyway, the rupee has reached just over 71 rupees against the dollar. Now things are out of RBI hands. Nothing will be even more than blowing up the dollar.
In the end, hear three things that burn your heart:
In India, petrol is selling Rs. 80/liters, the main reason behind this is the tax of the Central Government and VAT of state governments. Governments may want to reduce their taxes by reducing the oil prices, but the fiscal deficit of the Government of India is the fiscal deficit so much that the government can not do this even if it wants. Moody has already said that due to the oil prices, India will not be able to meet its fiscal deficit target of 2018-19.
Some people on the social media are advancing in the support of the Modi government, that compared to the other countries' currency, the rupee has still fallen short in front of the dollar. Hey Bhaiya, Russia, Brazil, China and Canada etc., however much the currency has fallen, but India will have to pay only in the US dollar. And we will bring that dollar by selling our rupee only So what do we have to do with the currency of other countries?
Now if a leader or policy-maker claims that these things will improve in the next one-and-two months, then this would be the most suspicious thing. Because the elections are coming in India next year and the dollar is constantly attracting investors. If there is something very strange at international level, then assume that there is no revolutionary change in the prices of petrol and diesel and the value of rupees before the 2019 Lok Sabha elections.
Thanks for reading! Please let us know how you think about this issue?
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