2. Devaluation of Currency…
Devaluation is a reduction in the value of a
currency with respect to those goods,
services or other monetary units with which
that currency can be exchanged.
4. REASONS FOR RUPEE
DEVALUATION
Deficit in imports and exports
Withdrawal of foreign investment from India
Rising inflation
Demand for dollar
Global Recession
Volatile stock market
Decreasing orders from outside
5. IMPACT ON FALL OF
RUPEE AGAINST
DOLLAR:
POSITIVE
IMPACT
NEGATIVE
IMPACT
6. IMPACT ON INDUSTRIES
Positive impact on Industries-
• IT sector
• Textile Industry
• Pharmaceuticals
• Gems & Jewellery
Negative impact on Industries-
• Metals
• Automobile sector
• Power
7. IMPACT ON CONSUMERS
• Negative impact on FMCG products
• Expensive home loans
• Higher fuel prices
• Costlier foreign education
• Expensive tourism
• Overseas Indians
8. MEASURES TO AVOID RUPEE
DEVALUATION
• Improving the climate for foreign investors
• Government should increase the limit of FDI
in the existing sectors
• Government should raise import duty on gold
9. WHY THE INDIAN CURRENCY COULD
BE UNDER PRESSURE?
• Exports falling
• Current account deficit could rise
• Dependence on foreign flows
• Fiscal deficit
• Growth slows
10. Conclusion
The value of the rupee in terms of dollars will depend over time on the
erosion of its value in terms of purchasing power internally. If inflation
has been at say, 7 percent, the rupee will have to fall to that extent
unless the importing countries are themselves victims of inflation. That
is not the case. Hence, the rupee has fallen the most compared to other
currencies because we had nearly the highest inflation. Eventually, the
rupee will stabilize, barring short-term disturbances, after correcting the
loss in its domestic purchasing power. The rupee will not go back to 45 to
the dollar; at best it will stabilize at 51-52.
