Depreciation of Rupees, Weighs High on Indian Economy

The fall in the value of rupees against US dollar has been continuing jolting the economy, which has already been facing the music of economic slowdown. The rupees is around 63 against the US dollar and 100 against GBP (Great Britain Pound). The depreciation of rupees has been affecting the household budget of all the people of India including poor, middle class and rich.

The government has been trying to bring stop the bleeding rupees in the currency market, but it seems that it is big challenge to keep the loss in short-term. To check the loss, the apex bank has changed most of it policies over the liquidity, gold import and investing in abroad.

But the result seems unchanged from the earlier scenario. The prices of the fuel in India are directly being affected with the value of rupees in the international currency market. And change in its value is enough tumble the prices of petrol and diesel in India. Once the rupee was at 35 against the US dollar, but now the scenario is just opposite.

As a custodian the apex bank would make further changes in its mechanism to stop the loss of the value of rupees in the international currency market. On the other hand, the political factor and food security bill introduction could be the major setback for the economy; those pushed the rupees against US dollar to a new low.

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RBI hikes Short Term Rates

The Reserve Bank of India (RBI) has initiated its actions to stabilize the rupees, which has been at its lowest value against US dollar in the currency market.

The RBI has hiked the short term rates on Monday to check the devaluation of rupees.

On Monday, the rupee was at around 59.89, and lately the rupee was slipped to its lowest of around 60 rupees.

The aim of the apex bank is to boost the value of rupees against US dollar by chacking the liquidity in the economy.

The latest move by the RBI would discourage the banks to borrow fund and that would ultimately control the liquidity and credit market.

However, the stock markets in India tumbled on Tuesday following the hike the short-term rate. Both BSE Sensex and NSE Nifty were traded in red at morning trade on Tuesday.

The banks may increase the deposit rates to attract more customers and that would help the banks not to draw more from the apex bank for the purpose of credit.

The RBI would also sell the bonds in the open market operation worth 12,000 crore rupees to check liquidity.


On the other hand, following on its economic reforms, the UPA government may further liberalize the FDI norms in some selective sectors to boost the inflow of foreign fund into the country.

Experts believed that the inflow of foreign fund was must to check the devaluation of rupees and Indian economy – that has been under pressure due to the global slowdown.

The Governor of RBI D Subbarao called on the Finance Minister P Chidambaram and discussed about the strategy to strengthen Indian rupees.

The fall in the value of the rupees has been weighing high on the economy.

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Rupee touches new all-time low; at Rs. 60.51/dollar

Rupee is getting weaker as the demand of dollar is increasing with the month-end closing. Due to heavy demand of dollar from importers, Rupee has attained a new all time low at Rs 60.51 per dollar.

With the value of Rs 59.73, market opened on Wednesday and it was expected that Rupee will grow a bit due to the intervention of Reserve Bank of India. Despite that that Rupee did fall and attained Rs 60.25 just in the mid-day.

This is the all-time low value of rupee. As the day progresses, Currency dealers expected that Rupee will be under Rs 60.5. But proving that wrong, Rupee has exceeded the mark and seems to fall more.

As to the experts, they expect that Rupee will fall even more and RBI can’t take any major steps to recover rupee. This is the straight sixth day that rupee is weakening due to huge dollar demand from importers.

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Indian Rupee slides to 58.30/USD

Not good news for the investors in Asian region as the India rupees hit all-time low of 58.30 against USD, in the opening trade on Tuesday. The fall in the value of rupees against US dollar would be the major concern for the investors in India.

Certainly, the import costs would go up weighing high on the Indian economy. In short-term the trade deficit would be at the its peak as the balance of payment might be disturbed with the high rate of US dollar against Indian rupees.

India parents would be more concerned if the children as studding in US as they need to pay more for the education fees. And the fall in the value of rupees also not a good sign for commonmen as the price of petrol and diesel could go up soon.

With the high international crude pride due to the high dollar value, Indian oil companies may go to hike the retail price of petrol and diesel ,which ultimately would be a big burden the consumers – the commonmen.

The rupee was closed at 58.15/16 against US dollar in the international currency market. Further slide in the value of the rupees could tumble the economy. However, the high dollar value a good sign for the IT and export companies, those have been getting their payments in US dollars.

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No Change in CRR and Repo Rate: RBI

Business News: The apex bank of India, Reserve Bank of India on Monday did not change the key interest rates. The Cash Reserve Ratio (CRR) remain unchanged at 4.75 per cent and the repo rate at 8 per cent. It was expected that the RBI may have some variation in the key interest rates to protect Indian economy from the falling value of the rupees in the international market particularly against the US Dollar.

The stock markets in India will have the impact of unchanged key interest rates by the Reserve Bank of India. The markets have been in choppy trading session due the weaken rupees against US dollar. 

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Rupees recovers and ended at 44 against US Dollar

Strong foreign fund flow made rupee bit stronger by one paise in the currency futures market on Tuesday. The fall in Euro was however a concern for the market and investor but proved strong point for Indian currency rupees.

On Tuesday, rupees ended at flat at 44 per dollar. The rupees has also witnessed the lowest rate of 44.53 and highest of 44.28 in the intra-day trading at the currency futures market.

The demand for the rupees at the currency futures market has been volatile and depending on the flow of the foreign fund into the market.

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Indian Rupees got new Symbol! What will be the impact?

Indian rupee got its own sign recently, the good news is that it will be brand for the Indian currency in the international market. The Indian currency rupees in India known as rupaya or rupaye. The term is derived from Sanskrit 'rupya' that symbolizes the metal silver.


In ancient India, the gold, silver and copper were considered as rupees and the coins were more convertible money. The evaluation of money covers the wide scope in the history, but the metals made their place in money transactions. In most of the parts of India still now, most of silver coins are good means of money for those have good hoardings.

The new symbol to Indian rupee will give brand identity to Indian rupees in the international market. This will also boost the trading and rate of the rupees in the international market and will have the special identity. Moreover, the symbol will represent India and its currency,where as earlier the Rupees term had been representing to other Asian countries also. This new symbol will make Indian rupees more acceptance power internationally. Not sure about that? Just wait for some years.

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Rupees Stronger than US Dollar?

New Delhi: Indian rupees has been becoming stronger against US dollar. The Finance Secretary, Ashok Chawla told media persons that the government would wait and watch the situation. It is believed that due to the global forces the rupees might become stronger.

However, the government is not concern with the stronger rupees against the US dollar. The change in the value of rupees against dollar will have direct impact on the export and imports. The volume of the trade would affected depending on its volume of international trade and transaction.

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Rupees appreciation to check the inflation

It is again the appreciation of rupees to check the inflation. The appreciation of rupees will help the economy to check the high inflation rate through the supply side. In order to check the bottleneck, it is important to maintain the supply of essential commodities into the market. Whereas the demand side for the inflation could be effective through fiscal measures. Last week the inflation reached to 6.68, considering this high inflation the central bank has reduced its market intervention to by dollar. This mechanism will helps in appreciation of rupees.

The appreciation of rupees against dollar is an advantage for the import of commodities from the international market. India is also planning to import essential goods and services to check the inflation from the supply side. The import of essential commodities from international market will increase the supply in the market and ultimately the supply will reduce the price. In this way the inflation can be brought down to a normal figure mark. However, the whole mechanism will take some time to put impact on the market. The government and central bank would also prefer to check the inflation from its demand side too by lowering the interest rate, which is also necessary to check the high inflation rate.

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Appreciation of rupees in Indian perspective

By P. Neelakantha Achary

The Indian economy is among the fastest growing economies in the world. The people have been now realising the true meaning of ‘shining India’. The liberalisation reforms of 1991 have been proved successful and it delivered the success in many ways. The economy is on the development path and maintaining a sustain growth rate. The GDP has been around eight per cent for three consecutive years. It can be expected that the day is no longer to see the Indian economy as the second largest economy of the world. The rising infrastructure and cheap manpower made this economy as favourable destination for investors. However, the agriculture sector is not at the pace as it depends on the irrigation measures and rain fed. The economic epidemics like poverty, population and low productivity, are biggest challenges to its growth. The dream of achieving the dual digit of GDP is a tough challenge ahead but it can be achieved. The revolution of the Information and Technology (IT) has made Indian economy further stronger. The sector has been providing a big relief to countries unemployment problem. India has been the favourite destination for countries to venture outsourcing projects, as cheap labour cost is the key factor.

The economy has been developing in most all the sectors and the Indian rupees marks its presence in the global market. Dollar used to be the most invoicing currency for foreign trade. Due to depreciation of dollar against Indian rupees made Indian economy further stronger in global arena. The value dollar in terms of Indians rupees used to be around Rs. 47, but it is significantly dropped to around 40 rupees. The depreciation of dollar and appreciation of rupees has put positive impact on Indian economy. It is worth mentioning here that, appreciation of rupees will have positive impact on import whereas it will have adverse effect on the export and IT sector. Let’s have a look on the impact of appreciation of rupees on export and software sectors.

The export sector of Indian economy made comprehensive progress over the last decade. The export sector has been contributing a lot to the GDP. The Indian export has been on rise, it grew by around twenty percent in comparison to the figures of the last year. The overall exports suggest that the Indian has been exporting its goods and services to the countries like Pakistan, UAE, Italy and US. It is very important to understand the Indo-US trade relations to know the impact of deprecation of dollar against rupees.

The reforms of 1991 have propounded the Indian export sector. The nation has been attracting the foreign investment flow and accelerating the trade flow. In Indian perspective, the Indo-US trade relation is very successful for the export and imports of goods and services. India has been exporting goods are services to US including metals, textile, sea foods, iron/steel products, machinery and chemicals. India’s share in US trade is 24th in US export and 18th in US imports. According to the statistical reports, the India’s export to the US in the year 2006-07 was 126,262.68 million US dollars, and it was 103,090.54 million US dollar in 2005-07 and US dollar is the invoicing currency for the trade. It is evident from the above figures that the trade with the US is a matter of million dollars, and a little volatile in the value of invoicing currency would result a loss or gain of million dollars. Let’s consider that the depreciation of dollar by 7 rupees from 47 to 40 rupees per dollar. Then the loss would be around fifteen percent, as the dollar depreciation from 47 to 40 rupees. In export the fifteen per cent matters much. The margin of fifteen per cent is enough to hit the profits. If a detail analysis would be made into the subject, then the out would give us clear cut picture about the net loss. In other words, the impact can be measure as loss of some million dollars, due to the depreciation of dollar.

It is significant to know that India's main exports to US are precious stones, worked diamonds, gold jewellery, miscellaneous textile article, fish and seafood, textile floor coverings, iron/steel products, organic chemicals and machinery that includes transmission shafts, gears, pistons, etc. A fluctuation in the value of dollar or rupees would affect the volume of export to US. The US dollar is main invoicing currency and a fluctuation will have larger impact on the volume of the export. Ultimately, it will hit the profits of the exporters.

For example, India has been exporting textile to the US. The depreciation of dollar will result huge loss in the revenue from the textile exporters. The loss will be suffered by the textiles industries but it will have negative impact on the manpower too. There will cascading effect on the laboures of textile industries, wherever there is huge loss incurred. So, the depreciation of dollar is not only affecting the textile exports but also affecting the household economy too. This is a big challenge ahead of us that need to be addressed through proper mechanism.

Considering this situation, the government of India has made its clear stand on the depreciation of dollar. According to the Economic Survey 2008-9, the depreciation of the dollar has slow down the growth of export and imports of major trading partners like United States. In order to address the concern, the government has approved some measures in the survey. The measures include: 3 per cent increase in the Duty Entitlement Pass Book (DEPB) rates for nine sectors; 10 per cent reduction in Export Credit Guarantee Corporation (ECGC) premium and release of around Rs 600 crore to clear all arrears of terminal excise duties and Central Sales Tax reimbursement. This would be a greater step towards protecting interest of the exporters.

Let’s evaluate the impact of depreciation of dollar on the Information & Technology (IT) and its export. India is emerged as the world leader in software development in the global arena. The IT sector has been achieving international accolade and giving tough competition to other countries. Some of the IT giant names of India like Satyam, Wipro, and Infosys are enough to portray the bang of IT sector of India. Indian IT sector is not only promises of redelivering best quality software development but also known for its human resources training and IT enable services which began in early 90’s. Indian Software Industry is estimated to be worth USD 1.2 billion. The sector has been growing significantly and many countries have been depending on India for their officer operations and automations. The poor infrastructure of the nation would be a set back to the software sector as major operations are set up in the metro cities only. According to a projection the annual revenue of IT industry in India would around $ 87 billion. Many nations have initiated for joint venture with Indian companies for IT enabled services.

The revenue from the software sector is key phenomenon for Indian economy. India’s excellence in software development and IT-enable services have drawn attention of global investors to invest in India. The IT sector has been boosting the employment opportunities which will be a key factor for the development of economy in a long-run. However, the high attrition rate and outflow of talent are the set back for this sector.

The depreciation of dollar has put negative impact on the software sector. The depreciation had hit the profit of the sector and their products and services are priced in foreign currencies. If the export of the software services were calculated in terms of dollar then a little change in the value of dollar is enough to hit the profit directly. It is clear that exchange value of dollar against rupees was 47 and at present it is around 40, if these figures will be considered then the net loss would be much more. This would a great loss to economy as the sector has been contributing a lot to the growth.

The bottom line is that the depreciation of dollar will have not only negative impact but also positive impact on Indian economy too. The importer will be on benefits as the import the goods and services by paying less as comparison in contract to depreciation of dollar. The appreciation of rupees will be a positive score for the borrowers of foreign loans. In a long-run, the positive and negative impact of depreciation of dollar against rupees will certainly change the fate of Indian economy.

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