The Current Economic Scenario : Rupee Depreciation

We know, our country is facing an economic debacle at this time of the year. With Inflation, rupee depreciation and slow GDP being the talk of the town, are we nearing an economic apocalypse ? These days the entire world has eyes set on our GDP, as it touches the lowest rate of decade now. With countries all over, showing interests in India’s economic slowdown, P.Chidambaram asks investors to keep calm and not to panic over this state of India’s economy. In addition to this, the fact that the rupee is going down against the dollar, day by day is no reason to panic according to our Finance Minister here. Also in an excerpt from one of the website, Chidambaram rejoices over India still being the second fastest growing economy after China. (Perhaps, he believes in sticking to number 2.)

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The drowning economy

** I am no expert to comment on such a topic, but this current scenario provides food to a million thoughts in my head.**

Rupee Depreciation : 61.60 INR against $ 1 is the new low that the our currency has set today. We’ve heard about Rupee Depreciation and its drawbacks a lot lately. Rupee Depreciation is when the value of Indian Rupee becomes less valuable in accordance to the US dollar. So when we say that INR hits a new low means, that 61.60 INR  together make 1 US dollar.  This degrades the value of Rupee causing various effects on our economic growth. The value of rupee has degraded over 13.60 percent in the last two months.

Lets have a look at some of the reasons on why the value of Rupee depreciates.

  • The price of crude oil has a major effect on the value of rupee.  The demand of oil in India is increasing day by day and to meet the ends India needs to import oil in bulk. The price is set in dollars. This is where the vicious circle plays its part. Demand for oil in the country increases, imports of oil increases and consequently the demand for dollar increases causing the value of rupee to depreciate.
  • Demand and supply have always formed the basis of economics. So if the demand for dollar in India escalates in comparison to its supply, the value of rupee decreases and that of the dollar increases. Demand for dollar increases when importers need more dollar to pay for their imports.
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The disparity
  • Of course, the equity market and the defaced value of the European and the Japanese currency have also caused the value of dollar attain a stronger position as compared to the other currencies.

                 rupeeT

Why is Rupee Depreciation a matter of National concern ?

We’ve been hit by this depreciation since April, four months already and it’s still dipping. Here are a few reasons which have raised panic among the masses.

  1. With costly imports, the inflation rate will increase even more in India.
  2. The capital flow is slow down causing investors to exit, this in turn will result in the fall of the Forex Reserves laying more pressure on the INR.
  3. Foreign holidays and studies will be more expensive.
  4. Petroleum and the by-products will become more expensive causing a tight grip on the subsidies.
  5. Due to inflation and higher prices, the demand for various goods will go down.

Rupee Depreciation is an alarming situation. It has brought the loopholes in our economic structure to light. The Government is taking steps to curb this fall of the rupee but it is all going futile. With the lowest in the history at 61.60, the Rupee depreciation continues to bring turbulence to the Indian economy and to the life of the average person.

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The historic fall

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