Depreciation of Rupee

Topics: Currency, United States dollar, Macroeconomics Pages: 10 (3057 words) Published: August 23, 2013
Introduction
D UDAY Kumar exhibited his profound creativity in designing a new symbol for an Indian Rupee but it failed to ignite any excitement, either in India or abroad for the simple reason that Indian Rupee is a beleaguered currency now, for it has lost its sheen over the years. A rich title for a poor currency! The value of Indian Rupee has devalued greatly since independence, notwithstanding some small measly upswings against dollar sometimes which is touted as a strengthening Rupee. The fact is that the real value of rupee has touched its nadir With every passing day Rupee is making new lows but for a common person it is not easy to understand the reason behind this steep fall and he keeps on asking himself a question 'Why is rupee depreciating? why indian currency is weak, why indian currency is falling down, why indian currency is depreciating?, Dollar after being stable for a long time now is climbing back up against the rupee. What do you think? Is it the right time that politician's money from Swiss banks should be taken out or will it be really late for us? Or we start depending on our own oil resources and stop importing the yellow metal from outside? Recession is less in India, then why dollar is moving up when rupee must be strong. We all know about recession and it is worse in US and better in India, then how come dollar is appreciating with respect to Indian rupee? Don't you think that Indian rupee should go up and US dollar should move down? There are so many reasons of depreciating rupee

Why dollar is moving up and rupee is going down? There has been a recent fall in rupee since some days ago and a dramatic increase in dollar. It was 49.50, then 50.12, 51.10, 52.60, 53.54, 54.40 and stable, and now What is the current rate of dollar?

1 US dollar = 61.65 Indian rupees.
The oil minister is going to raise petrol prices by the third quarter of this year as rupee is down again. RBI is always trying to protect rupee by selling off dollars but still has been unable to hold rupee from falling at a rapid pace. Due to rise in dollar, gold prices have slashed down. The last resort of controlling rupee fall is issuing bonds by Reserve Bank of India. To prevent further downfall of Indian rupee, RBI is considering selling dollars directly to oil marketing firms. BODY

causes
Why is this happening?
THE CHANGING FACE

Money is not an organic creature but its value keeps changing with the society and its economic conditions. One rupee in 1947 is not the same as one rupee today, both in terms of appearance and purchasing power.

The value of a country's currency is linked with its economic conditions and policies. "The value of a currency depends on factors that affect the economy such as imports and exports, inflation, employment, interest rates, growth rate, trade deficit, performance of equity markets, foreign exchange reserves, macroeconomic policies, foreign investment inflows, banking capital, commodity prices and geopolitical conditions," says Pramit Brahmbhatt, chief executive officer, Alpari Financial Services (India), a foreign exchange brokerage.

Income levels influence currencies through consumer spending. When incomes increase, people spend more. Higher demand for imported goods increases demand for foreign currencies and, thus, weakens the local currency. First Reason - Dollar is in Demand

BRIC countries like India have emerging economy, so a huge percentage of investment in India is from outside the country, especially from US but due to recession in US, big institutions are collapsing and many of them are on the verge of breakdown. They are suffering huge losses in their country. They have to maintain their balance sheets and look strong on all statements, so to recover losses in their country, they are pulling out their investments from India. Due to this pulling out of investment by these big companies from India or in other terms disinvestment, demand of dollar is raising up and...
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