Post on 21-Jan-2015
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Welcome to Saturday
Discussions @ CPPRDr. D DHANURAJ
• Familiarize yourself with Value of the Rupee1
• Explore new environment and context2
• What are the remedies suggested for an improved economy?
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Today’s Overview
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
Depreciation of Indian Rupee
• Real/Relative Value of currency
• Influencing Policies• Take Away
Real/Relative Value for currencyDemand 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………………..
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
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
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
Influencing Policies
• Generate employment opportunities– Manufacturing policy 2010– Improve Basic infrastructure
• Fiscal management– Food Security Bill– Subsidy bills– GST– Import bill
• Improve exports
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
Questions???
Thank you!!!