Rupee at Historic Low Against the US Dollar: Causes and Effects

Indeed, time and again, the Indian currency value or rupee has kept hitting record low values against the US dollar. This is an economic indicator of instability, and on examining common people, businessmen, importers, and exporters, in the way of explaining reasons and effects to them.

Reasons Why Depreciation Has Occurred in The Rupee Against the Dollar

Rising inflation: At present, commodity prices in India have rapidly changed. As a consequence, the purchasing power of the Indian currency has tended to go down, and therefore, demand for foreign currency, especially dollars, would increase.

Shrinkage of supply of foreign exchangeRemittancesce reduced and export earnings reduced due to foreign countries, causing a reduction in the supply of foreign currency. Consequently, there exists increased demand for dollars as well as a diminished supply of rupees.

Effect of the Global Market: The existing condition of high presence of dollars in the international market and their consequent rise against those of other countries is yet another important reason why the Indian currency depreciated.

Effects of Rupee Weakness

Rise in import costs: Falling value of the Indian currency causes increased import costs. Consequently, the prices of fuels, raw materials, and other components imported into a country rise along with those of everyday consumer goods.

Convert: External Debt Burden Serves: Foreign loans need increased rupees for repayment and hence lay more financial burden upon the government.

Inflation Increase: The rise in cost prices of imported goods leads to an increase in the cost of living among average citizens.

Effect on Exports: A fall in the value of the Indian Currency might be an advantage for exports, but it probably won't yield the most from it due to the uncertain condition that prevails in the global economy.

What Should Be Done to Come Out of The Situation?

The exchange audit should be done right by putting appropriate policies into practice for proper management and control over foreign exchange within the Indian economy. For example, the expatriates' remittances could be raised because of that. Inflation can be controlled; increases in exports and volume controls would also be sufficient. Necessary timely intervention by the central bank is also essential.

The declining record of the Indian currency value against different currencies is a great menace to India. It severely degrades the economic conditions of the poor. Hence, the situation calls for alertness and combat at both the government and business levels among citizens. Political stability shall ensure upward mobility for the rupee value on the economic scale.

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