2. INDIAN RUPEE
The Indian rupee (sign- ` , code - INR) is the
official currency of the Republic Of India.
The issuance of the currency is controlled by
the Reserve Bank Of India.
U. S. DOLLAR
The United States dollar (sign- $ , code - USD, also
abbreviated US$), is referred to as the U.S. dollar or
American dollar. It is the official currency of
the United States and its overseas territories.
3. Currency Depreciation
Currency depreciation is the loss of
value of a country's currency with respect to one or
more foreign currencies.
Currency Appreciation
Currency appreciation is increase in the
value of a country's currency with respect to one
or more foreign reference currencies.
4. Rupee's journey
since Independence:
Down by 65 times
against dollar
Year
Exchange rate
(INR per USD)
1947 1
1966 7.50
1975 8.39
1980 7.86
1985 12.38
1990 17.01
1995 32.43
2000 43.50
2005 (Jan) 43.47
2006 (Jan) 45.19
2007 (Jan) 39.42
2008 (October) 48.88
2009 (October) 46.37
2010 (January 22) 46.21
2011 (April) 44.17
2011 (September 21) 48.24
2011 (November 17) 55.40
2012 (June 22) 57.15
28.08.2013 68.8
03.10.2013 65
5. Reasons why Rupee is Depreciating :
1.Demand and Supply of Currency (Basic law of
economics)
When the demand of foreign currencies increase in respect of its supply
then value of local currency decrease in respect of foreign currency. If the demand
for the dollar in India is more than its supply, the dollar appreciates and the rupee
depreciates.
2.Withdrawal of investors
Recently ArcelorMittal and Posco decided to pull out from their projects in
India. Posco did not go ahead with a steel plant worth INR 30,000 crore that was
supposed to be built in Karnataka and ArcelorMittal withdrew from setting up a steel
plant in Odisha that was supposed to cost around 52,000 crore. There were lot of
delays and problems related to acquiring land for the project. In fact in 2012-13 the
Indian companies have spent more outside India compared to FIIs in India.
6. 3.Price of crude
The price of crude puts tremendous stress on the Indian Rupee. India has
to import a bulk of her oil requirements to satisfy local demand, which is rising year-
on-year. Globally, the price of oil is quoted in dollars. Therefore, as the domestic
demand for oil increases or the price of oil increases in the international market, the
demand for dollars also increases to pay our suppliers from whom we import oil. This
increase in demand for the dollar weakens the rupee further.
4.Increase in the trend of abroad education
The trend of getting higher education in abroad is increasing due to the
same the demand of foreign currencies will increase.
5.Growth slowdown:
India's gross domestic product (GDP) growth fell to a decade low of 5 per cent in 2012-13.
The situation is unlikely to improve much this year. Foreign investors are pulling money
out of the Indian markets due to slow growth.
7. 6.Widening current account deficit
Other Reasons::
7.Low forex reserves
8.Recovery in the US:
9.Speculative trading:
8. Effect of Rupee Depreciation
1.Import
Importers will strongly feel the pinch of falling rupee as they will be
forced to pay more rupees on importing products. Buying imported goods will become a
very costly. We will have to pay extra on imported goods. e.g. if we bought a product
valued USD 1, you paid around Rs 54 (weeks ago) but you will now have to pay of Rs 63
for the same product.
2. Export
Export has to very effected due to Rupee depreciation as exporters
will be get less rupees for exporting goods. Exported goods will become cheaper. e.g. if
we sold a product valued Rs. 630 , we got USD 12 (weeks ago) but now a days we get only
USD 10 for the same product.
3. Inflation
If the depreciation in rupee continues, it will further increase inflation because
the prices of imported as well as domestic commodities will increase . In respect of
domestic goods , the domestic goods will also effected due to transport cost.
4. Students studying abroad
Students who are studying abroad will bear the burden of depreciating rupee.
Expenses incurred towards the university/college fee as well as that of living will increase.
9. 5. Foreign Travelling
Foreign trips become costly . Indians are very interested to
spend their vacation in the foreign countries.
6.Overseas Indians:
Money saved is money earned. Depreciation of rupee is certainly a good
news for the overseas Indians. Those working abroad can gain more on remitting
money to their homeland.
7.Fuel price:
A weak rupee will increase the burden of Oil Marketing Companies
(OMCs) and this will surely be passed on to the consumers as the companies are allowed
to do so following deregulation of petrol and partial deregulation of diesel. If the OMCs
increase fuel prices, there will be a substantial increase in overall cost of transportation
which will stoke up inflation.
8.Country’s fiscal health:
A frail rupee will add fuel to the rising import bill of the country and
thereby increasing its current account deficit (CAD). A widening CAD is bound to pose
a threat to the growth of overall economy.
10. Steps for Rupee Appreciation
1. Export
Indian economy should take steps for increasing Export and
with the help of export, the supply of foreign currencies will increase and
the value of Indian Rupee will increase in respect of foreign currencies.
2. Import
Indian economy needs to decrease Import and with the
help of less import , the demand of foreign currencies will increase and the
value of Indian Rupee will increase in respect of foreign currencies.
3. Promote Tourism
The history of HINDUSTHAN is very famous in the whole world and
every person of the world wants to know about it , so Indian government should promote
the tourism for the foreign.
11. 5.Steps taken by Govt.to save Rupee against
• The RBI can raise the policy repo rate, currently at 7.25 per cent.
• The government can raise foreign investment limits in debt.
• It can also increase duties on non-essential imports, like electronics.
• It can announce additional fiscal and economic reforms to defend the rupee
4. Awareness among people:
• Reduce use of petrol diesel and should use public transport
• Reduce investing on gold
• People should use made in India products instead of imported products
• Government should support Production of export products with quality control
for long term success reduce tax on export products
