Falling of Indian Currency. Rise of Dollar.
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The Indian rupee has depreciated significantly against major global currencies like the US dollar over the past few decades. It has fallen from Rs. 1 in 1947 to over Rs. 65 against the dollar in recent months due to factors like a widening current account deficit, lower foreign exchange reserves, and a slowdown in economic growth. While the RBI and government have taken some measures to curb volatility, like increasing interest rates and imposing new FX controls, the rupee continues to decline sharply.
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Falling of Indian Currency. Rise of Dollar.
- 1. RUPEE IN TEARS WHILE DOLLAR SNEERS Falling Indian currency Copyrights Aankhi Anwesha
- 2. Journey of Rupee since Independence Copyrights Aankhi Anwesha The Indian currency has witnessed a slippery journey since Independence. Many geopolitical and economic developments have affected its movement in the last 66 years. ₹1 1947 1948- 56 ₹4.8 1962- 65 ₹7.5 ₹8.4 1975 At the time of Independence External borrowings for FYP; fixed rate currency regime Link with British currency broke down; linked with US dollar War with China(1962), Pakistan(1965); huge deficit on India’s budget
- 3. ₹12 1985 ₹17.8 1991 ₹31.4 1993 2000- 10 ₹40- 50 Further devalued to 12 against a dollar BOP crisis; high inflation; low growth; forex reserves(3 weeks) Copyrights Aankhi Anwesha Mostly at around 45 against a dollar; touched a high of 39 in 2007 Currency let free to flow with market sentiments. July Rs. 60.75 August Rs. 65.56 September Rs.67.75 October Rs. 61.31 The Indian currency has gradually depreciated since the global 2008 economic crisis. The Indian currency depreciated by Rs. 40 in 50 years of Independence. But in last 16 years alone the Rupee has drastically fallen by Rs. 27.95
- 4. Rupee in the past 13 yearsCopyrights Aankhi Anwesha
- 5. USD/ INR IN LAST 3 MONTHS Copyrights Aankhi Anwesha
- 6. PRESENT SCENARIO Copyrights Aankhi Anwesha The Indian rupee alls to a low of 65.50 to the dollar as heavy demand from importers along with weak domestic equities continued to weigh on sentiment. Continuing its slide, the rupee also made all time low against British pound and breached the 102-mark on local bourses. With this, British pound has become the first major foreign currency to cross 100 levels against rupee. Steps taken by the RBI and the government to curb volatility in the exchange rate have had little effect so far.
- 7. WHY IS RUPEE SINKING EVERYDAY? Copyrights Aankhi Anwesha
- 8. FOUR MAIN REASONS Import/ Export Foreign Direct Investment(FDI) Foreign Institutional Investment(FII) Remittances Copyrights Aankhi Anwesha
- 9. 1. Widening Current account deficit : Result in actual and speculative demand 2. Low forex reserves: are enough to cover imports of only 7 months 3. Growth slowdown : GDP growth rate 5% in 2012-13 4. Dependence on foreign money : CAD financed by foreign money, withdrawal by overseas investors 5. Recovery in the US : slow but steady recovery 6. Capital controls: impose temporary restrictions on capital flows; Discourage foreign firms from pumping money into India 7. Speculative trading: putting pressure on rupee Copyrights Aankhi Anwesha
- 10. Copyrights Aankhi Anwesha IMPACTON CONSUMERS GOVERNMENT ANDECONOMY
- 13. Steps RBI and Government can take to stabilize Rupee 1. Stable political and economic environment in order to make India an attractive destination for foreign investments. 2. Raise import duty on gold to decrease the domestic demand for gold import. 3. Government and both RBI should take measures to bring down high inflation rates. 4. Steps to boost export-intensive sectors 5. Develop import-substituting industries in order to make India less dependent on imports. 6. RBI should hike the interest rates in order to reduce the money supply in the economy. Copyrights Aankhi Anwesha
- 14. Latest RBI measures to control Rupee 1. Increase in Marginal Standing Facility rate Copyrights Aankhi Anwesha
- 15. Copyrights Aankhi Anwesha 2.New foreign exchange controls restricting the amount of dollars Indian companies’ and individuals can spend overseas 3.Banned people from buying property in foreign countries
- 16. Th an kYou Copyrights Aankhi Anwesha
Editor's Notes
- Looking at the current economic outlook, it is necessary for both government and RBI to step in and prevent the further depreciation of rupee. Following are the measures that should be taken by RBI and government:- Government should increase the limit of FDI in the existing sectors as well as encouraging in other sectors such as aviation, retail, telecommunication, radio & broadcasting etc. Government should create a stable political and economic environment in order to make India an attractive destination for foreign investments. Government should raise import duty on gold in order to decrease the domestic demand for gold import. Government and both RBI should take measures to bring down high inflation rates. Government should steps boost export-intensive sectors and develop import-substituting industries in order to make India less dependent on imports. RBI should sell Forex reserves and buy rupees in an immediate action in order to arrest the further decline in the value of rupees. RBI should hike the interest rates in order to reduce the money supply in the economy.
- 1.The RBI has increased the Marginal Standing Facility (rate at which banks borrow from the RBI using their statutory liquidity ratio securities as collateral) rate. So far, banks (bearish on the rupee) borrowed from call money markets and bought dollars in the forward markets expecting the dollar to rise. Since, borrowing short term money will now be costlier, banks will most likely cut their forward positions and reduce speculative trading. This will reduce pressure on the rupee. http://www.hindustantimes.com/business-news/businessbankinginsurance/RBI-cuts-short-term-rate-for-banks-eases-hike-fears/Article1-1132165.aspx
- 2. The RBI has capped the amount banks can borrow from overnight markets to Rs. 75,000 crore. The RBI will also conduct Open Market Sales of bonds of Rs.12,000 crore on Thursday. These measures are aimed to suck liquidity from the system. Bond prices will fall and yields will rise. Higher yields will attract foreign investment back into the debt market at a time when FIIs have sold billions of dollars ever since the U.S. Fed signalled a tapering of the quantitative easing.