Reasons for Depleting Value of Rupee
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Reasons for Depleting Value of Rupee

Reasons for decrease in the value of rupee in India have been many. Investment from overseas is a major factor used to provide economical balance. Recession, Inflation, government crisis and corruption issues and high deficit rate are few reasons for depletion of value of rupee which have been addressed briefly.

One of the major concerns in India recently has been the decrease in value of rupee. The value of rupee was reported 45 INR during August 2011 and since then it has been increasing gradually. The conversion rates have gone drastically down and currently the value of 1 dollar equals approximately 53.5 INR. There are few reasons which are related to the downfall of value of rupee in India.

A basic law of economics states that “the value of a product increases with the increase in demand for the product”. This means that the downfall in value of rupee is due to its lesser demand which is true. India being a developing country makes use of resources from foreign market to fulfill the demands of its citizens. The stock market of India has a large amount of investment from overseas. The number of investments increases with the increase in performance of the markets of India compared to those of other countries. These investors require rupee to invest here which leads to an increase in demand for rupee along with its value. The performance of Indian markets has been poor for the past one year turning down many overseas investments.

Recession has been one of the primary reasons for such an economical imbalance in India. The effects of recession have been more severe to United States and other foreign countries compared to India. Due to this, the number of foreign investors has reduced considerably in the past one year as they have to use money wisely.

Another reason which can be stated for reduction in foreign investments is the exposure of major scams and corruption issues in India which has affected investor’s sentiments. The commonwealth games scam, 2G spectrum, black money are few issues which have made Indian politics in news worldwide. Campaign started by Anna Hazare and his team was able to gather attention of global media along with the investors.

Currently India has a high deficit rate which means that India is trading more outside the country than it is actually earning inside. This increase in deficit rate is another alarming issue as it would lead to increase in the demand for foreign money and thus reduction in rupee.

Due to the reduced rupee value, the prices of products which are imported such as crude oil, medicines, electronic products-laptops, and so on have already started to rise. Petrol prices have seen a drastic increase since the rupee degrade. Software companies are enjoying this phase of economical imbalance in India as they are getting paid for their projects in dollars. Also the freelancers, article writers who work on projects for different foreign clients are getting higher profits than they used to get before. RBI (Reserve Bank of India) must intervene and lay down certain policies which can systematically reduce the depreciating value of rupee in India.

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Comments (3)

Impression review! Truly, your insite is spot-on correct.

@thestickman..Thanks for the appreciation

The reasons pointed out in the article for depletion of rupee are correct and must be sorted out fast. Reserve bank of India should lay down certain policies to control the downfall in rupee against dollar. Nice article..Voted up