Declining Currency

In the foreign exchange market, the value of one dollar was pegged at eighty-one rupee nine paise, which is the lowest level ever.

The major reason behind the devaluation of the rupee is believed to be the tightening of interest rates by the US Federal Bank, the strengthening of the dollar and the weakening of investor confidence in India. Although the Reserve Bank of India is adopting a strict stance in its monetary policy to curb inflation, which has also seen some positive results.

But a fall in the value of the rupee will present challenges in overcoming inflation and attracting investments. India is largely dependent on other countries in terms of petroleum products and edible oils.

When the rupee depreciates, there is more spending on imports of goods, which means that the prices of those goods go up in the domestic market. To overcome the devaluation of the rupee, a strategy of increasing exports vis–vis imports has to be adopted. But India is not able to grow at the expected pace in terms of exports.

The devaluation of the rupee has an impact on the foreign exchange reserves. The trend of the Indian stock market remains weak, foreign investors are not showing enthusiasm. Due to this, the foreign exchange reserves are continuously decreasing. Then the biggest challenge is to overcome the current account deficit.

India’s current account deficit is already at a worrying level, with the devaluation of the rupee expected to widen it. The share of industrial growth rate in GDP is running very low. The government has been trying to cut taxes, loan waivers, business rules and flexible labour laws to accelerate it and attract investments.

But its effect is not visible. In such a situation, due to the devaluation of the rupee, once again the purchase of crude oil and eventually the prices of petrol and diesel will increase. This will have an impact on the cost of industries. This will increase inflation. Right now the Reserve Bank has admitted that if inflation remains up to 6 percent, then the hope of recovery in the economy will be strong, but retail inflation is not reaching even this level.

The prospects of controlling inflation in the coming days also remain bleak, as this time the production of rain-dependent crops is expected to be much less than the target. Uneven rainfall has also created problems for the upcoming crops. In such a situation, it can also be difficult to control the prices of everyday items.

Already, the government has tried to control inflation by banning exports of some commodities and reducing import duties on some. But this method cannot be tried for long.

The government claims that after the Corona period, exports have increased and exports have exceeded the target, but the reality is that the rupee is devaluing. To prevent this, it is necessary that efforts should be made to occupy maximum space for Indian products in the international market.

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