Sinking rupee puts financial burden on foreign travellers

As the rupee falls past the psychological mark of 55 against the dollar, foreign trips are spiralling out of the reach of middle class as costs escalate by 20 per cent.

Lalatendu Mishra

Mumbai,
Updated May 22, 2012 3:15 PM IST

Sinking rupee puts financial burden on foreign travellers

With the Reserve Bank of India (RBI) remaining a mute spectator on Monday, the rupee fell past the psychological mark of 55 against the dollar to close at 55.03 depreciating by as much as 61 paise in one day. During intraday trade, the rupee had touched 55.05 against Friday's closing of 54.42. Analysts believe the rupee is dropping towards 56 to a dollar or even more.

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The free fall of the rupee has caused additional financial burden on foreign travellers, students studying abroad, importers and gold jewellery buyers. At this exchange rate, the cost of foreign travel is spiralling out of the reach of the middle class. Many government officials and middle-rung executives who save throughout the year and with some borrowings to go on rare foreign trips have been forced to cancel their programmes as the costs have escalated by 20 per cent.

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About 2.5 million to 3 million Indians travel to foreign shores every year. There are about 2.5 lakh Indian students studying abroad at any given point in time who will have to shell out more for their fees and living expenses.

A retired official in Mumbai who is sending his son for higher studies to the US is worried by the sudden fall of rupee. When the study was planned, the calculation was done at Rs 45 to a dollar. Now, it has depreciated to over 55 adding a burden of Rs 10 per dollar, he lamented.

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According to members of the travel trade, budget tourists who go to destinations in South East Asia have been severely affected. "Budget travellers with a family package of Rs 80,000 are worst affected as a 20 per cent increase in their tour package (Rs 16,000) has added a big burden. Tours to Europe and US with high-end customers have not been affected that much as the hike has not made much difference for the rich segment. But the rupee depreciation has caused lot of burden on the travel trade, which will bear a loss of 10 per cent," said Lalit Sheth, chairman and managing director, Raj Travel World.

Travel agents said they are witnessing cancellations due to the sudden depreciation of the rupee, and flight disruptions by Air India, which has resulted in hiking of fares by other airlines.

Rather, many families are opting to travel to a domestic destinations like Goa, Jammu and Kashmir or Kerala as they do not have to pay in foreign currency.

Pratik Mazumder, head, marketing and strategic alliance, Yatra.com, said, "The rise in rupee is definitely slowing down international travel especially people who are looking to travel during summer holidays. Even though tickets are booked much in advance, under the foreign exchange rules, a certain amount has to be paid under the existing rates. Now, the fear is whether there would be a further fall in rupee, which would result in travel rates going up further."

The rise in the value of dollar has also helped gold prices to move up by Rs 182 to reach Rs 29,155 per 10 gramme despite lack of demand in the lean season. Importers, especially oil firms, have also taken a major hit as their cost has escalated by more than 10 per cent.

"Today, the rupee depreciated sharply due to heavy buying of dollars by some big enterprise and there were rumours about some large defence-related payment. This added to the demand for the dollar. There was no intervention by RBI to support the rupee," said Hemal Doshi, chief currency strategist, Geojit Comtrade Ltd.

The way the rupee is sliding, it will soon reach 55.9 0 and 56.10. The kind of situation we are in, temporary interventions by the RBI will not help. The rupee may appreciate for a day or two with RBI intervention, but it will head downwards as the fundamentals are weak. RBI knows this and did not intervene today as there was no merit in exhausting its foreign exchange reserves," Doshi added. In the past weeks, RBI had intervened directly to ease the pressure on rupee, but the Indian currency is heading for a free fall adding more pain to the economy.

Courtesy: Mail Today

Published on: May 22, 2012 8:24 AM IST

Sinking rupee puts financial burden on foreign travellers

As the rupee falls past the psychological mark of 55 against the dollar, foreign trips are spiralling out of the reach of middle class as costs escalate by 20 per cent.

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