Saturday Discussion on Rupee Depreciation

1. Welcome to
Saturday Discussions
@ CPPR
Dr. D DHANURAJ

2. • Familiarize yourself with
Value of the Rupee1
• Explore new
environment and context2
• What are the remedies
suggested for an
improved economy?
3
Today’s Overview

3. Rupee in News!!!
• Rupee closes in on 69 vs dollar its biggest
day fall in 18 years
• Outgoing RBI Governor blames Government
for sinking Rupee
• Gold shines at record high
• Rupee opens at record low
• Rupee posts biggest single day rise in 15
years
• Country faced with difficult economic
situation: PM

4. Depreciation of Indian Rupee
• Real/Relative Value of
currency
• Influencing Policies
• Take Away

5. Real/Relative Value for currency
Demand Vs Supply
• Imports/Exports
• Employment
• Interest rate
• Inflation
• Growth rate
• Trade deficit
• Performance of equity market
• Foreign exchange reserves
• Macro economic policies
• FIIs and FDIs
• Commodity prices
• Geopolitical equations etc………………..

6. Demand and value of a currency
• When income increases, consumption
increases
– It can lead to higher import of goods leading to high
demand for foreign currency and weakens the local
currency
• Balance of payment
– Country sells more goods and services than what it
imports
– It is the recipient of foreign currency and strengthens
local currency

7. Demand and value of a currency
• Changes in the interest rates
– High interest rates for NRIs can attract more savings
and more foreign currency, leading to strengthening
of the rupee
• Monetary policies
– Cash reserve ratio
– Open market selling
– Tightening of fund flows
– Statutory liquidity ratio
– Repo rate

8. Demand and value of a currency
• Inflation
– Good and services are excess and money is in
excess supply
– Purchasing power of currency falls
– Imports becomes costlier
– Exporters gain

9. Influencing Policies
• Generate employment opportunities
– Manufacturing policy 2010
– Improve Basic infrastructure
• Fiscal management
– Food Security Bill
– Subsidy bills
– GST
– Import bill
• Improve exports

10. Take Away
– Build the confidence in the investors with
consistent policies
– Not only opening the market, but enhance
‘Doing Business’ Climate
– reduce the import bill
– Effective utilization of natural resource wealth
– Counter ways to eliminate stashing money
abroad

11. Questions???

12. Thank you!!! 