The depreciation of the rupee is hitting Indian customers hard.
A day after Samsung priced its new Galaxy S3 model phone at 30% more than the price of its predecessor, due primarily to a 20% depreciation in the value of the rupee, Ricoh announced a 5% increase in its printers and other office products.
These are only two of the most visible price increases. More price increases of manufactured commodities such as electronics, TVs, appliances, computers and others are on the way, according to industry sources.
Many vendors have not increased prices yet, assuming that the fall in the value of the rupee is a temporary one and things will go back to normal in a few days. However, if the value remains low, the prices of manufactured goods could go up by about 20% soon.
Most of India’s consumer-oriented manufactured items are imported from China or other Asian countries such as Malaysia. As they are priced in foreign currency, when the value of the rupee goes down, importers have to shell out more rupees to import the same item compared to a month ago.
The Indian rupee has gone from around Rs 45 per dollar to Rs 55 per dollar in about three months.
Ricoh said it too was hoping that the situation will turn around soon, but could not wait any longer.
“In spite of the huge depreciation of Indian Rupees vis-à-vis USD, we have been trying to hold on to our pricing to our customers till now, hoping that the situation would improve soon. However, we are now constrained to increase the prices of our office products by up to 5%, so as to at least partially cover the impact,” Tetsuya Takano, MD & CEO of Ricoh India, said.
Even the cost of Indian-manufactured goods are likely to go up as many of them contain goods that are imported — such as copper.
The value of the rupee has gone down as many foreigners who had invested in India took back their money due to changing political scenario in India. Indian finance minister Pranab Mukherjee decided to bring in a special law to tax foreign investor Vodafone, even after the Supreme Court said the centre had no right to tax Vodafone for capital gains made by Hutchison Whampoa of Hong Kong.
The move had led to warnings from many foreign investors that it sent a negative signal that Indian government would change laws even with retrospective effect. Besides, the high price of oil and overall price rise has slowed down India’s economy to just 5% GDP growth, compared to 9% in 2007.