Advantages and dis-advantages of weak INR vs USD

Sharply falling Indian Rupee, which has crashed more than 20% since 1st May 2013, is giving sleepless night to importers and RBI but costly import due to currency depreciation is only one side of the coin. 

There are distinct advantages of weaker INR against USD beside having obvious problems. Following are the interesting pros and cons of weak INR vis-a-vis  USD.

Advantages:

1. The most obvious benefit is to the exporter, which in turn would revive economic growth. Textile sector is among the first off the block. The sector has witnessed strong growth which is reflected in the numbers disclosed by the ministry. In fact, the ministry has revised its export target by 20%. 

2. Foreign investment both through the secondary market and direct investment into sectors which are relatively sheltered from a weak currency can yield better returns over the long run. A stronger dollar would give the investor more rupees in his hand and thus an opportunity to buy more shares.

3. Though India does not attract the massage seekers, a weak currency can make the destination attractive for in-bound traffic. Medical tourism can get a shot in the arm.

4. A number of Indian companies now have sizeable international presence apart from direct exports. A stronger foreign currency helps boost their consolidated numbers. 

5. Import substitutable products get an indirect shelter on account of a weak currency. Metals, especially steel was affected by imports from other Asian countries, but a weak rupee has increased the landed price of these products. A number of sectors and companies that price their products on import parity basis will benefit. 

Disadvantages:

1. India imports key inputs like oil which is the fuel for its growth. Rising imports will increase the current account deficit. 

2. A weak rupee imports inflation as it increases the cost of imported goods. This will further reduce RBI's ability to lower key policy rates. 

3. Students looking to study abroad are severely hit as they have to shell out more rupees to meet the cost. 

4. Certain sectors which are dependent on imports become uncompetitive. With government discouraging imports of non-essential goods like Gold, a weak rupee can lead to rising unemployment.

5. It affects those companies who have raised debt abroad and have not fully-hedged their position.