The document discusses the factors contributing to the depreciation of the Indian rupee against the US dollar. It notes that recession in developed economies like the US has led to outflows of money from India. Additionally, concerns over defaults by European nations have resulted in loss of confidence in the euro and appreciation of the dollar. Investors also view the dollar as a safe currency due to fears of a bubble bursting in gold. This has led to a widening trade deficit and spike in dollar demand, putting pressure on the rupee. The current account deficit is expected to be between 3.0-3.1% of GDP by March 2012.

1. Presented By
The Nutcrackers
Nihar Routray
Manjesh Bharati
Shankar Narayan
Chinmay Sharma

4. Recession in developed economies like US
made big institutions to pull out their money
from India

5. Default concerns of European nations has
resulted in loss of confidence in the Euro and
appreciation of dollar

6. The fear of bubble bursting in gold has
resulted in investors viewing dollar as a safe
currency

7. • Trade deficit has widened by 40,000 crores in
the last quarter. This has resulted in increased
imports and spike in dollar demand

9. Expecting current account deficit to
settle at 3.0-3.1% of GDP by Mar 2012

14. Q> In 2008, we saw a drastic Rupee Devaluation
against the USD. Is the current scenario similar?
A> No. Last time around, the devaluation was
driven mainly by rise in oil prices. The price of oil
reached USD 147 per barrel and was one of the
key contributing factors. However, risk aversion
was also a part which affected the value of the
Indian Rupee.

15. Q> Has the Risk Aversion among the Investor
Public changed when we compare the times in
2008 to now?
A> The concept of risk aversion is the same.
But, the current situation is much more riskier.
Back then, the problem was due to debt
problems in US. Right now, the problem is more
profound and markets world-over are in a crisis.
So, people are much more risk averse than what
they were in 2008.

16. Q> If investors take out their investment from
European countries to invest in US, would it have
any effect on the exchange rate of rupee?
A> Not much. Only the US Dollar investments
made in India will affect the exchange value
between US Dollar and Indian Rupee. US Dollar
investment in Europe will not affect the
exchange rate in India.

17. Q> What can the RBI do?
A> Raise policy rates
A> Use FOREX reserves
A> Ease capital controls
A> Administrative measures