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| Falling Value of Indian Rupee - Effects On Indian Economy 2018 |
Falling Value of a Currency refers to the devaluations of a currency against other currency Ex: Dollar rate in India 2 years before was around 60 Rs and now it becomes more than 70 this is the basic example of the devaluation of a currency.
First, let us understand how this increase or decrease of a currency happens, this up and down of any currency will not decide by a country or a person, it totally depends on demand for a particular currency for example recently the Indian Rupees is falling down because of the high demand of USD.
At present, USD is accepted all over the world by the trader. Indian Rupee had hit a fresh record low, the Rupee opened 70+ versus USD this change happened because of Turkey Economic Crisis. As the investors from the foreign country who invest money in Turkey requesting Turkey's Central Bank to return their investment money in USD because of the economic crisis of Turkey, USD demand is increasing day by day, therefore, the Indian currency is also Falling down.
The Indian currency touched an all-time low of 70.08 against the US Dollar while marking depreciation of around 10 percent in 2018. The fall came majorly due to a drop in Turkish Lira, which helped the US Dollar to gain strength on the back of fears that the economic crisis in Turkey could spread to other global economies.
Impact of Falling Value of Indian Rupee on Various Factor:
Import:
As India is the one of the world largest importer of Crude-oil, Palm Oil, Fertilizer, Iron Ore and other petroleum product, India has to pay for them in Their Domestic currency or commonly accepted US Dollar, while India pays in US Dollar its import bill will be increased based on USD. Ex: Two years before if an Indian company import any product costing 10$ has to pay 600 Rs, but now for the same product the company has to pay 700Rs which is expensive.
Export:
Although India is not a big exporter, it will get benefited when it exports products to other countries by Ex: When there is Falling Value of Currency the country which exports goods and in return receive money in US Dollar,
$10 Exports = 600Rs (2016-17)
$10 Exports = 702Rs (2018)
the country whose export is higher as China will get benefited when there is a Falling value of Currency.
Current Account Deficit(CAD):
Generally, Current account deficit is referred to the difference between the Export and Import of a country. As India is a country whose Export is comparatively low and Import is more, the CAD is decreasing in India. The increasing CAD is loss leading Situation for India.
Inflation:
Devaluation of Rupees is playing the dominant role in inflation when the value of the rupee decrease against US Dollar the import bill of India will increase when the import bill increases the price all petroleum product will also increase, automatically the transport costs of all basic product like Food, Vegetables, and Palm Oil will increase. This is one of the reasons why the petrol rate increased in India.
Students:
The Indian who had taken loans from Foreign Nations and studying, when they make repayment they have to Pay in US Dollar, as the US Dollar strengthing for 1$ They have to Pay 70 Rs, but when they receive loan the USD was around 65Rs which is soo hard to repay.
Traveling:
As the US Dollar 70Rs, for exchanging 1$ we have to pay 70Rs + Commission. the traveling cost will increase for Indians.
Electronic Equipment:
Electronic Equipment from the foreign country will become too expensive in India, because of the falling value of India, for example, iPhone Xs priced at 144900Rs its Actual price in the USA is 105000 only. the difference of 40000 is the worst part for Indian
Foreign Direct Investment:
The Foreign Direct Investment increases because of the devaluation of Indian Rupee when the investor invests 1000$ then they have 60000Rs two year ago, but now the investor is getting 10000 Rs more for 1000$ Obviously any Investor will the interest to invest in the country where its currency is becoming low.
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