Every country in the world has its own currency except Europe Nations. The whole continent of Europe has only one global exchange currency i.e. Euro. While deciding the value of currency it is important to consider its Forex rate. Forex rates are calculated based upon its exchange rate with other currencies. This rate changes constantly and depends upon the demand and supply that occurs daily in the exchange market. According to the trade, a currency value is considered to have appreciated if you have to pay fewer amounts to buy the currency of equal value during the exchange. Similarly, the currency value is considered to have depreciated if you have to pay more amounts to buy the currency of equal value during the exchange.
Effect of Depreciation of Rupee on Indian Economy
Depreciating value of Rupee in India is bound to some real major impact on the Indian Industry. The damage would be big and scary as the production units and manufacturing organizations would be affected by large.
Suman Jyoti Khaitan, the President of PHD Chamber of Commerce and Industry expressed his concern over the issue. As India’s imports quotient has been over 20 percent more than Indian exports is going to be beyond any apprehension.
In case, the value of Rupee in India continues to deteriorate, the trade deficit that India will generate may not be containable even with a lot of effort. This will form a vicious circle of low flow of foreign investments and the overall growth revival of the nation will, once again take toil.
The President of the chamber has stated that the since the fiscal deficit and current account has already touched alarming peaks, they are creating serious challenges in front of the policy makers for management of economy. Depreciation of rupee in such a scenario is further going to increase the government’s anxiety. It is a common observation that the rupee being weak is not powerful enough to buy trade and initiate growth in exports and thereby giving scope to improve trade balances. The global demand condition greatly affects the export Indian scenario.