Rupee depreciation and its impact on Indian economy

By Ashish Bisht E - 10

What is rupee depreciation

It is a situation when a countrys currency is reduced in value in comparison to other currencies

Reasons for rupee depreciation

Demand Supply Rule(import-export, FIIs) Dollar gaining strength against the other currencies Oil prices Volatile domestic equity market Gold price Political paralysis

Some facts
Business Today reported today that overseas investors pulled out a record Rs 44,162 crore (over $7.5 billion) from the Indian capital market in June 2013. With a risk-off environment setting in globally, there have been redemptions from global exchange-traded funds (ETFs). This has led to selling by FIIs in the Indian equity market, compounding the rupee's woes.

Advantages of rupee depreciation

Advantage to Exporters

Boom to tourism industry

Disadvantages of rupee depreciation

Imports become extremely expensive

Reduction in Purchasing Power Parity

Steps RBI can take

Using Forex Reserves Raising Interest Rates Make Investments Attractive- Easing Capital Controls