Seventeen-year-old Indian student Appu Sharma was going to apply to a US university to study economics but with the rupee on the ropes, he’s set his sights closer to home.
“I’ll do my BA here and maybe my postgrad abroad if the rupee improves — my family can’t afford to pay foreign fees now,” the New Delhi Class 12 student told AFP.
With the currency hovering at record lows of nearly 69 rupees to the dollar and seen heading south, the estimated 300-million-strong middle-class are being forced to rethink many of their plans.
Holidays abroad are being jettisoned as India grapples with its “new normal” — a weak currency, growth at a decade-low of five percent, stubbornly high consumer price inflation and elevated interest rates that are stifling investment.
“Dollar on an escalator, rupee on a ventilator, nation in the ICU,” reads one Twitter joke that went viral in India, lamenting the nation’s economic trials.
Subhash Goyal, head of the Indian Association of Tour Operators, forecasts up to a 20 percent drop in Indian tourists going abroad this year and calls the situation “grim”.
“It’s the middle class which is worst impacted (by the rupee’s drop),” Goyal said, adding: “People are already postponing plans.”
Sales of cars have also gone into reverse as Indians steer clear of showrooms due to high financing and fuel costs and the economic slowdown. India’s car sales slid by over seven percent in July, marking a record ninth straight month of decline.
R.C. Bhargava, chairman of Maruti Suzuki, the country’s largest carmaker, called this “the worst period I’ve seen in a long time”.
Amid a deepening slowdown, dozens of malls across the country have shut with real estate experts saying retailers can’t afford store rents with consumer purchases slowing.
As the sombre mood mounted this month, the government curbed outflows of currency for individuals and companies in a bid to put a floor under the rupee’s slide.
Commentators called the move a worrying throwback to the days before India unleashed its economic liberalisation drive in the early 1990s, when Indians’ access to foreign exchange was strictly limited.
Under the new policy, individuals can send just $75,000 out of India, down from $200,000 — making it tougher to pay overseas university fees, for example — while firms can only ship out funds equivalent to 100 percent of their net worth, down from 400 percent.
Just a couple of years ago, the “India Story” still seemed alive and well with the economy growing at over eight percent and the country seen as an emerging economic powerhouse.
But investor concerns about the slow pace of economic reforms, government corruption scandals and widespread graft have come to a head.
Since the start of the year, the rupee has lost around a fifth of its value against the dollar and the prices of life’s little luxuries on which India’s middle class have come to depend — from imported appliances to smart phones, cheeses, wine, hair products and olive oil — are set to climb.
B. Thiagarajan, president of airconditioning firm Blue Star, told local media: “We are left with no option but to increase prices”.
The pinch is yet to seriously impact the more than two-thirds of India’s 1.2 billion population who subsist on less than $2 a day — according to World Bank figures — who do not travel abroad or spend on non-essentials.
But the rupee’s tumble will still make things tougher when they shop as a weaker currency translates into costlier imported goods — from fuel and fertiliser to edible oils and electronic goods — on top of already crippling domestic food inflation.
At the so-called “Top of the Pyramid”, defined by Indian ratings house Crisil and Kotak Wealth Management as the more than 100,000 Indian families with a minimum net worth of 250 million rupees ($4.4 million), people are still splashing out on super premium cars and exclusive goods.
Luxury carmaker Audi reported its sales from January to July jumped 19 percent to over 5,550 cars while Rolls-Royce calls India one of its strongest markets in Asia and just rolled out the most powerful model from its stable, the Wraith, priced at 46 million rupees ($730,160).
The “Big Fat Indian Wedding” — multi-day extravaganzas with groaning tables of food, lavish displays of gold jewellery, fireworks and hundreds of guests — is also still going strong, albeit with an eye on the final tab.
“They want the world but people now are working more to a budget — two years ago it used to be carte blanche,” Sumant Jayakrishnan, known as India’s decor king for his wedding extravaganzas for Indian billionaires, told AFP.
Jayakrishnan declined to name figures but press reports calculated the three-day wedding he helped design for the daughter of British-based billionaire Pramod Agarwal in 2011 in Venice cost $27 million.