reasons behind the falling of indian national rupee

1. Free Fall Of
Indian Rupee-
Factors
responsible
Sameer Garhawal
By -

2. Valuation history
The Indian Rupee
was pegged to the
British Sterling
from 1926 to
1966 at INR 13.33
to 1 Pound.
The peg was
changed to the US
Dollar in 1966 at
Rs 7.5 to 1 USD.
Year
Exchange rate
(INR per USD)
1947 1
1948 - 1966 4.79
1966 7.50
1975 8.39
1980 7.86
1985 12.38
1990 17.01
1995 32.427
2000 43.50
2005 (Jan) 43.47
2006 (Jan) 45.19
2007 (Jan) 39.42
2008 (October) 48.88
2009 (October) 46.37
2010 (January 22) 46.21
2011 (April) 44.17
2011 (September 21) 48.24
2011 (November 17) 55.3950
2012 (June 22) 57.15
2013 (May 15) 54.73
2013 (Sep 12) 68.

3. Graph showing the fall of Indian rupee against US dollar

4. Factors
responsible for
the fall of Indian
Rupee

5. HUGE TRADE
DEFICIT
Since India imports more goods (in
value terms) than it exports, it
results in a huge imbalance in trade,
or what is called a trade deficit.

6. Uncertainty about India's commitment to economic reforms,
retrospective taxes, and policy paralysis within the government
have forced foreigners to either postpone their investment
decisions, or take money out of Indian stock markets.
LOWER CAPITAL INFLOWS

7. HIGH CURRENT ACCOUNT
DEFICIT
In 2011-12, India's CAD was $78.2bn, a
huge jump from less than $46bn a year
ago. In 2012-13, it swelled up by 9.6% i.e.
87.8bn

8. DEVALUATION PRESSURE
In such a situation, more people tend to sell
rupees to buy dollars
The demand-supply gap between the dollar
and the rupee leads to devaluation.

9. LOW GROWTH & HIGH
INFLATION
with high inflation due to high food and fuel prices. The
rate of inflation may rise this year to double digits if the
government is unable to curb its fiscal deficit.
In this scenario, most foreigners as well as Indians tend to
take money abroad, or keep it away from India.

10. RUPEE SPECULATION
Once currency traders and speculators realize
that India's central bank is unable to manage
its exchange rate, and reduce the adverse
impact on its currency, they may enter the
market in a big way to sell the rupee.
As a result, the rupee may devalue more
than it should.

11. Impact of fallen prices of rupee