How does the Fall of the Indian Rupee Affect the Indian Economy?
The value and performance of a currency have a huge impact on its economy, as the currency performs well the economy performs well, and vice-versa. A fall in the value of the Indian Rupee badly affects the economy as the rate of inflation increases in the country. However fall in the currency improves the exports of the nation as it becomes cheaper for foreign buyers, but as per the current scenario, there is a huge reduction in the overall global demand. Thus the total exports from the nation also decreased contributing furthermore to the fall of the Indian rupee. With the fall in the Indian rupee, the MSME sector gets badly impacted and thus resulting in job losses and increases unemployment.
Causes Of Rupee Falling Against US Dollar And Its Effect
Whenever the value of a currency falls, it badly impacts that nation’s economy and results in a higher rate of inflation. The value of any currency falls or rises based on the demand for one currency over another. For example, if there is a higher demand for the US dollar than the Indian Rupee then the value of the Indian rupee falls against US Dollar and vice-versa. The demand for a currency is driven by the nation’s total imports and exports. Like if India imports more than it export it raises the demand for the US dollar oversupply thus resulting in a fall in the value of the Indian rupee against the US Dollar.