India is passing through a most critical situation which arises due to the depreciation of Indian rupee against the U.S dollar. The rate of Indian rupee against one dollar at one instance lowered till RS.65 making the entire nation at a crucial standstill. Discussions, opinion polls, expert viewpoints all are taking place in the national medias to form strategies for solving this booming ie value of dollar will decrease the value of rupee. That means, the buying power of rupee will go down. Since India is a country which largely depends on imports, the appreciation of dollar in the international market will affect Indias import requirements. The investors always prefer to keep their money at the safest pockets during this season which again makes the situation worst. They will not prefer to invest their money in the fluctuating Indian economy.
India is passing through a most critical situation which arises due to the depreciation of Indian rupee against the U.S dollar. The rate of Indian rupee against one dollar at one instance lowered till RS.65 making the entire nation at a crucial standstill. Discussions, opinion polls, expert viewpoints all are taking place in the national medias to form strategies for solving this booming issue and to revive the country from the great disaster towards which it is presently moving on.
The mechanism through which the rate of rupee is determined gains importance in this circumstance. The most important factor determining the rate is the market function of demand and supply. When th
Government always encourage exports while putting a lot of restrictions on imports. The appreciation of dollar is in a way beneficial to the exporters because, during exports the demand for rupee increases. But, our present situation clearly figures out the increasing demand for oil and petroleum products as well as gold from the international market. This will increase the demand for dollar. Although the Government has imposed certain restrictions on the import of gold including a tariff increase of several times, the situation is not under control.
Fiscal deficit is another factor that could result in the depreciation of rupee value. When the nations expenditure is more than its revenue, Government borrows money from the World bank , IMF etc. The payment towards its interest and principal shall further increase the value of dollar. Many are of the opinion that the history of 1991 will repeat and its symptoms are already visible in our economy. But, the experts including the saviour of the 1991 crisis Dr. Manmohan Singh has clearly stated that there is no room for such worries and the economic scenario in India has changed a lot since the 1991 period.
The timely intervention of the Reserve bank of India through open market operations can control the situations to a certain extend. When the rupee depreciates significantly RBI sells dollars and thus increases the su
ay to save the common man from the sufferings of this new economic puzzle.
Parvathy Menon: MBA finance graduate
pply of dollar. The rupee- dollar issue can affect the lives of common man at the bottom level through the rising prices of commodities. Initiating actions that can control the situation should be taken without any del from Cochin University of Science and Technology (CUSAT), Kerala. Also possess a diploma in Banking and Finance from Indian Institute of Banking and Finance, Mumbai. Freelance writer who is interested to work on Economics, Finance and developmental issues. Articles published in a number of Indian magazines. Regular writer at The Indian Fusion magazine. Particularly interested in the research and analytics field. Contact: vkparvathy1990@gmail.com
Parvathy Menon