Devaluation of rupee

1. Devaluation of RUPEE

2. MEANING
 Devaluation is the reduction in the value of
domestic currency in relation to foreign currency.
 It means deliberate reduction in the external
value of national currency .
It makes exports cheaper in foreign markets and
imports higher in domestic market.

3. Rate of exchange of rupee
The rupee was linked to the British
pound till 1946. Rate of exchange of
rupee was fixed in terms of pound.
But India had a fixed external value of
rupee in terms of gold or u.s.dollars.
It became the member of IMF system of
fixed exchange rates in respect to exchange
currencies like UK pound,US dollars, ect.

4. RECENT DECLINE IN VALUE
of RUPEE
First devaluation done in sept.1949 by 30.5% and
rupee came down to 30 cents.
Second in june 6th by 1966 by 36.5% exchange
rate came to 7.50-4.76.
Third was made in 1991 july from 20-23% of
major currencies.
The decline was due to balance of payments,
liberal policy,and gulf war.Indian rupee lost its
value of dollars in open markets.

5. • Balance of payments
• Liberal import policy
• Gulf war .There has been continuous decline in
value of rupee since1991-92 RBI tried to intervene
in exchange markets but it failed.Indian rupee was
heavily lost its value of dollar in open markets.

6. causes
Foreign exchange reserve crisis 1991
Improvement in balance of payments
Reforming the external sector
IMF conditions
Low ranking international agencies
To prompt capital formation
Devaluation by other countries
To prompt tourism

7. conditions
o Sufficient supply of exports to meet increased
demand .
o Simultaneous devaluation by other countries.
o Price level should remain stable
o Devaluation can achieved by elasticity of
demand for exports ,imports
o Devaluation is effective when we substitute
imports with our domestic products.

8. effects
Positive effects:
 Increase in exports
 Decrease in imports
 Boost to tourism industry
 Full utlisation of capital
Negative effects:
 increase in price
 Short term remedy
 High price for imports

9. Consequences of devaluation
A solution to 1991 crisis to solve the problem
Export expansion ,do not affect devaluation much
on exports.
Less effect in imports determined on policy and
price factors
Not a complete success; decrease in world trade
and production
Effect on domestic economy is unhealthy effect on
domestic econmy . It affects domestic price both
imports and exports price rise in rupee terms .

10. THANK
YOU
BY..
A.Divya
||.B.COM -A