International Journal of Research in Economics and Social Sciences
Year : 2014, Volume : 4, Issue : 1
First page : ( 1) Last page : ( 8)
Online ISSN : 2249-7382.

Depreciation of rupee and its effects

Dr. Boraiah G.B.

Assistant professor, Economics, A.V.K College for Women, Davanagere-2

Online published on 5 June, 2014.

Abstract

Rupee depreciation refers to the fall of the value of home currency against the foreign currency caused by the demand for foreign currency exceeding its supply in the market at a given point of time. Presently rupee has been continuing with its downward trend since a couple of months. Moving from bad to worse, the Indian currency hit new all time low of 68.85 three weeks ago. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with that of the world price. With the liberalization, globalization and privatization policy of the Indian economy in recent years, imports are bound to increase the lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Taking cognizance of the adverse impact the ongoing slowdown has had on the Indian economy, the Prime Minister's economic advisory council on Friday scaled down its GDP projection for the current fiscal to a more realistic 5.3 per cent from 6.4 per cent estimated earlier¹.

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