Depreciation of Rupee

How is currency valued?

When the demand is greater than supply, the value of the

currency increases and vice-versa.

Political environment in the country

Retrospective taxation

Inability to pass any policy reforms and other clouds surrounding

the Indian economy

Loss of confidence in investors

Money flowing out of Indian equities

Reasons for Depreciation

Withdrawal of FII’s

Strengthening of Dollars

Weaker Capital Markets

Other Capital Flows

Political Uncertainty and Corruption

Demand Supply Rule

Fiscal Deficit

Oil Prices

Weaker Capital Markets

Eurozone crisis

Rise in gold prices

Causes

Impact of depreciation of Rupee

Exporters are the biggest

beneficiaries 

NRIs become richer

Tourism industry will flourish as the

holidays in India will get cheaper.

Imports will become expensive•Oil prices will increase

•Rise in inflation

•Poor returns on FII’s

•Difficulty in repayment of

loans

•Foreign education will get

expensive

•Foreign holidays will get

expensive

CONCLUSION

Rupee deprecation has some serious disadvantages and if

this fall is not controlled in time, it can have serious effects

on the Indian growth story and also it can lead to

downgrading of Indian economy by rating agencies all over

the world. The recent report of Standard and Poor indicated

how the economy can take a bad hit if the situation is not

controlled immediately. The rupee certainly has a

widespread impact on NRI’s to the common man of the

country who is fuelling his car fuel tank. The time has come

when the Reserve Bank of India and the Central Government

has to intervene and take conscientious steps and frame

policies reforms to control the situation.

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