Why Rupee is Depreciating in Comparison to US dollar- Full Analysis on Rupee Devaluation

Why rupee is depreciating in India despite all sincere efforts by Governments puts us in a thinking mode. The depreciation of domestic currency for any country puts in economy to stagnation. This is the case with any economy across geographical boundary. The issue assumes significant preventive measures for a developing country like India. Depreciation of Indian rupee in relation to the US Dollar is basically due to the fact that there is excessive demand for dollars and low supply of dollars.

Value of currency of a country is completely depend upon the strength of competitive exports, foreign trade surplus, foreign investment for long term and reduction on imports. Additionally, When the GNP of a country is large then the value of currency of a country will be appreciated. Everyone knows that India imports more as compared to the exports hence it needs more dollars for import of the goods and services

Let us Know the Reasons of Rupee Depreciation, From Beginning 

1. Rupee depreciating in comparison to dollar was begun since the time of independence in 1947. In 1947 the value of rupee and dollar was equal. The value of rupee and dollar was remained equal till 1951 because at that time India had no debts. When India took loan for FIVE YEARS PLAN in 1951. Since then the rate of rupee continuously started decreasing. Accordingly, the rate of dollar in comparison to the rupee in between 1951 and 1964 had become 4 times.

2. In 1965 and 1966 India was facing the severe famine  which exhausted the foreign capital reserve. Because, the government of India imports 15 million of tones wheat from USA, to curtail the misery of Indians.

3. India imports ammunition in greater amount to tackle with the other countries, because India had defeated from china in 1962. So, it imports the army weapon to strengthen its defence which also depleted the foreign exchange reserve. However, the situation became worst and to normalize the foreign capital, India devalued the currency from Rs 4 to 7.

The devaluation was aimed at boosting the exports and bringing in foreign capital into the country.

Let us See Where India Needs Dollars:

1. India requires defence related equipment which requires billion of dollars. It has spent billion of dollars in purchasing the Rafale jet fighters deal.

2. India is on the 3rd rank in the world who imports the crude oil in capacity, it also imports CNG, LPG, so it needs more dollars for exports. Demand of these stuffs increases regularly. We have also the poor supply, and the vehicles consuming more petroleum. Hence India imports more and they cause the increment of dollars and depreciation of rupee

3. Demand of dollars increases as million of rich Indian prefer to go for vacation and conduct meeting in abroad that requires billion dollars

4. Those who prefer to study in US, china, Europe, Australia etc. requires billion dollars to Emigrate there

5. India imports simple goods from the US, China of which we do not require and can be easily manufactured in our country. Here billions of dollars required

6. It also needs to import high tech, I-phones, laptops, cameras, jewelry etc. and technology related component. India spends millions of dollars in these stuffs.

7. India also imports exotic vegetables and fruits from other countries for the consumption of rich people. Here, million dollars require

8. We need billions of dollars for buying gold and depositing dollars in Swiss bank to escape from the government taxes.

9. Rich people reserves dollars and wait for the depreciation of rupee so that they can get profit.

10. Exports of goods and services from the India is less,

How Does India Get Dollars ?

1. Exports of Jewelry, diamonds, gemstone is the hyped for dollars earning. We get dollars by exporting these stuff.

2. India’s Cinema industry makes their film in abroad and they release these films in overseas and the dollars but the dollars we get from these films in overseas is less in spending the dollars during their shooting for TV and shows.

3. Minerals which India exports from mining bringing the dollars but NGOs and supreme court had banned on some mining industry which reduced the exports.

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