Falling of Indian Currency. Rise of Dollar.

Copyrights Aankhi Anwesha

RUPEE IN TEARS WHILE DOLLAR SNEERSFalling Indian currency

Copyrights Aankhi AnweshaJourney of Rupee since Independence

The Indian currency has witnessed a slippery journey since Independence. Many geopolitical and economic developments have affected its movement in the last 66 years.

1947₹1 1948-56₹4.8 1962-

65₹7.5 1975₹8.4

At the time of Independence

External borrowings for FYP; fixed rate currency regime

Link with British currency broke down; linked with US dollar

War with China(1962), Pakistan(1965); huge deficit on India’s budget

Copyrights Aankhi Anwesha1985₹12 1991₹17.8 1993₹31.4 2000-10

₹40-50

Further devalued to 12 against a dollar

BOP crisis; high inflation; low growth; forex reserves(3 weeks)

Mostly at around 45 against a dollar; touched a high of 39 in 2007

Currency let free to flow with market sentiments.

The Indian currency has gradually depreciated since the global 2008 economic crisis.The Indian currency depreciated by Rs. 40 in 50 years of Independence. But in last 16 years alone the Rupee has drastically fallen by Rs. 27.95

July Rs. 60.75

AugustRs. 65.56

September

Rs.67.75

October

Rs. 61.31

Copyrights Aankhi AnweshaRupee in the past 13 years

Copyrights Aankhi AnweshaUSD/ INR IN LAST 3 MONTHS

Copyrights Aankhi AnweshaPRESENT SCENARIO

The Indian rupee alls to a low of 65.50 to the dollar as heavy demand from importers along with weak domestic equities continued to weigh on sentiment.

Continuing its slide, the rupee also made all time low against British pound and breached the 102-mark on local bourses.

With this, British pound has become the first major foreign currency to cross 100 levels against rupee.

Steps taken by the RBI and the government to curb volatility in the exchange rate have had little effect so far.


WHY IS RUPEE SINKING EVERYDAY?

Copyrights Aankhi AnweshaFOUR MAIN REASONS

Import/ Export

Foreign Direct Investment(FDI)

Foreign Institutional Investment(FII)

Remittances

Copyrights Aankhi Anwesha1. Widening Current account deficit : Result in actual and speculative

demand

2. Low forex reserves: are enough to cover imports of only 7 months

3. Growth slowdown : GDP growth rate 5% in 2012-13

4. Dependence on foreign money : CAD financed by foreign money,

withdrawal by overseas investors

5. Recovery in the US : slow but steady recovery

6. Capital controls: impose temporary restrictions on capital flows;

Discourage foreign firms from pumping money into India

7. Speculative trading: putting pressure on rupee


IMPACTONCONSUMERS

ECONOMYANDGOVERNMENT

Copyrights Aankhi AnweshaSteps RBI and Government can take to stabilize Rupee

1. Stable political and economic environment in order to make India an attractive destination for foreign investments.

2. Raise import duty on gold to decrease the domestic demand for gold import.

3. Government and both RBI should take measures to bring down high inflation rates.

4. Steps to boost export-intensive sectors

5. Develop import-substituting industries in order to make India less dependent on imports.

6. RBI should hike the interest rates in order to reduce the money supply in the economy.

Copyrights Aankhi AnweshaLatest RBI measures to control Rupee1. Increase in Marginal Standing Facility rate


2.New foreign exchange controls restricting the amount of dollars Indian companies’ and individuals can spend overseas

3.Banned people from buying property in foreign countries


hank ouT Y

Falling of Indian Currency. Rise of Dollar.

Economy & Finance

Transcript of Falling of Indian Currency. Rise of Dollar.