New Delhi, June 20 (KNN) Runaway rise of dollar against the Indian currency  touching almost Rs 60 is a bad news for India’s energy- starved  small and medium enterprises which depend on imported fuel for captive power generation as also those importing raw material.

While the weakening of rupee which lost about eight per cent only in the last two weeks should augur well for exporters, the gains are not really commensurate. For one, some of the exporters would have hedged the currency at lower rates while overseas buyers for others would seek discounting in their prices.

Net-net, a big fall in rupee value does not help the economy as it would lead to increase in inflation that in turn would further depress the consumer and industrial demand. A large number of industry segments are reeling under slowdown and price increase would add further pressure . Industries in several states like UP, Haryana, Andhra Pradesh, Tamil Nadu and Karnataka are facing huge power deficit which they try to make up through expensive diesel.     

The overall sentiment in the financial market is dismal with the stock market tanking with over 500 points on the Sensex on Thursday.  

Government on its part tried to do some damage control. Finance Minister P Chidambaram held discussions with his key advisors trying to find ways to stem the rupee slide.

“We are not short of instruments. We have a range of instruments to call on us and when needed, we will call upon the,” Chief Economic Advisor in the Finance Ministry Raghuram Rajan said.

Some analysts, however, felt that the central bank itself is allowing the Indian currency to find a free float. “Both the willingness and ability appear to be limited for the government…the RBI is also favouring relative free movement of the currency”, Head of Research at Standard Chartered Bank said in his media interactions.

A recent study done by the Federation of Indian  Micro, Small and Medium Enterprises (FISME) the rupee depreciation  has not really exports grow. On the contrary, exports declined even as the rupee depreciated, which ideally should have made exports increase.  A study by the PHDCCI also pointed to a similar trend.

Crude oil is India’s largest import item which will surely get expensive with weakening of rupee. Gold, precious stones and pearls , besides machinery are other items of import. The country also imports electronic components, personal computers parts, mobile phones. The education abroad and overseas travel would also become expensive.