Indian Economy: Reasons of The Ruppee Depreciation

One of the main reasons for devaluation of the Rupee is the continuous expansion of the current account deficit. Over the past few years India's current account deficit has surpassed 5% of GDP. This can be confirmed in the table below. Through the 1990s, Indian commodity exports expanded rapidly with India's liberalization of the economy. Even in a global slowdown environment, impressive growth continued from 2002 to 2008, reflecting the continuing demand for traditional markets and new markets.

Inflationary pressure in any economy can cause depreciation of the local currency. The Indian rupee has declined by about 20% since April 2008 due to inflation, and the Indian economy is facing this situation. Impact of inflation - ordinary people: Inflation affects ordinary people with various roles such as consumers. Direct import using crude oil, fertilizer, medicines, products such as ores, metals, or imported parts such as personal computers and laptops. All of these goods became very expensive due to depreciation of the Indian rupee. Components in the computer, such as processors, hard drives, and motherboards, are also imported. Products such as mice, keyboards, and monitors are also affecting the price due to the devaluation of the rupee. As infusion costs increase, inflation in the economy may rise

In this article we will discuss the cause and effect of the depreciation of the rupee on the Indian economy. Since last month, overseas investors have reduced the influence on the third largest economy in Asia due to increasing international concerns and concerns about the domestic economy, Indian rupees are under great pressure. From 2009 to 2010, the exchange rate reached approximately 43-45 rupees per dollar. This is currently between 55-56, mainly due to an increase in import bills, an increase in inflation, a lack of financial management and all of these leading to higher borrowing costs. Rupee lost more than 15% of its value this year, making it one of Asia's worst performance currencies.