Rupee Depreciation - Discussion

Welcome to Saturday

Discussions @ CPPRDr. D DHANURAJ

• Familiarize yourself with Value of the Rupee1

• Explore new environment and context2

• What are the remedies suggested for an improved economy?

3

Today’s Overview

Rupee in News!!!• Rupee closes in on 69 vs dollar its biggest day

fall in 18 years• Outgoing RBI Governor blames Government

for sinking Rupee• Gold shines at record high• Rupee opens at record low• Rupee posts biggest single day rise in 15 years• Country faced with difficult economic

situation: PM

Depreciation of Indian Rupee

• Real/Relative Value of currency

• Influencing Policies• Take Away

Real/Relative Value for currencyDemand Vs Supply

• Imports/Exports• Employment• Interest rate• Inflation• Growth rate• Trade deficit• Performance of equity market• Foreign exchange reserves• Macro economic policies• FIIs and FDIs• Commodity prices• Geopolitical equations etc………………..

Demand and value of a currency

• When income increases, consumption increases– It can lead to higher import of goods leading to high

demand for foreign currency and weakens the local currency

• Balance of payment– Country sells more goods and services than what it

imports– It is the recipient of foreign currency and strengthens

local currency

Demand and value of a currency

• Changes in the interest rates– High interest rates for NRIs can attract more savings and

more foreign currency, leading to strengthening of the rupee

• Monetary policies– Cash reserve ratio– Open market selling– Tightening of fund flows– Statutory liquidity ratio– Repo rate

Demand and value of a currency

• Inflation– Good and services are excess and money is in

excess supply– Purchasing power of currency falls– Imports becomes costlier– Exporters gain

Influencing Policies

• Generate employment opportunities– Manufacturing policy 2010– Improve Basic infrastructure

• Fiscal management– Food Security Bill– Subsidy bills– GST– Import bill

• Improve exports

Take Away

– Build the confidence in the investors with consistent policies

– Not only opening the market, but enhance ‘Doing Business’ Climate

– reduce the import bill– Effective utilization of natural resource wealth– Counter ways to eliminate stashing money

abroad

Questions???

Thank you!!!