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Reasons for Indian rupee depreciation, Measures to take.

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What is Depreciation mean?

 

Depreciation is the ‘decrease in the original value’. This can be simplified b

“Weaker currency makes it more expensive to buy imported goods which in turn leads to the problem of inflation”y understanding that the rupee has become less valuable with respect to the US Dollar. Rupee depreciation causes the exports to the other countries less valuable.

Up till 2000, the exchange rate( INR per USD ) is around 43 rupees. In January 2010 it has become 46 rupees. In November 2011 it has become 55 rupees. On 12th of September,2012 it has recorded as 70.36 INR per USD. At present, it is around 62 rupees.

The reasons for this include many which could be the major or minor imports and several domestic or global reasons. The major imports are the scarcely available resources such as

– Gold

– Petroleum products

– Refined Oils

– Iron and Coal

whereas minor imports also make severe depreciation on the rupee value such as

– Electronic gadgets such as mobile phones, Digital cameras etc..

– Imported perfumes, household items

– Food and beverages

In India, there is a tradition to wear the gold and diamond ornaments for the auspicious occasions. So there is a requirement for these which are not abundantly available in India. India has to import these from the other countries which are at huge prices. When the rupee value gets depreciating, the percentage for each dollar increases making the demand for the dollar to increase. Moreover, the other major import is the petroleum products which are scarcely available in India.

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The other reasons could be Volatility in Indian markets and the different sectors in India such as industrial sector, mining, agriculture has poor growth in the economy in this year.

However, Indian government has to take some short and medium term steps in order to retain its value around 40. Besides every individual should think and discuss about this issue as part of their work for the growth of Indian economy. It could be either using the public transport in order to reduce the usage of the petroleum products or by minimizing the purchase of Gold(because they are the major imports to India). Purchase the products which are made in India.

Related information:

10 reasons why the rupee is sinking every day – NDTVProfit.com
How Should India Combat Rupee Depreciation? – Seeking Alpha
History of the rupee – Wikipedia, the free encyclopedia
Depreciation of Indian rupee can affect India’s economy: Indian PM
Collapsing Asian Currencies? Why is the Indian Rupee Depreciating? 

 

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