Indian Rupees Fall Story

Indian Rupee Fall Story

Consider 1 $ = 1 Rupee will the life of an Indian must have been easy. To some extent, the situation used to be similar earlier.

  • In 1947 when $1 was equal to 3.3 rupees
  • In 1985 $1 was equal to 12.38 rupees
  • In 1995 $1 was equal to 32.42 rupees
  • In 2011 $1 equal 55.39 and
  • In 2022 $1 equals to Rs.79

We all know that the Rupee is depreciating day by day to know-how let’s first no who decides the value of the Rupee

Who decides the Rate?

Indian Rupees Fall Story - Who decides the Rate?

The answer to this question is no one if you check the Rupee to Dollar Rate you find a certain rate which is called as Foreign Exchange Rate which is not decided by any one institution this Rate is decided by Market Forces that are by Demand and Supply.

This demand and supply completely depend upon the Buying and Selling of certain Currencies. Yes it is true people buy money

For example, went tourists Visits to some other Country they sell their Home Country Currencies and buy the currency of the Destination Country similarly Businesses purchase Foreign Currencies using their Home Currency.

So if India wants to import crude oil from Russia the trade won take place in Indian rupees. It takes place in Russian Rubel so first, they will buy Russian Ruble and then using the Rubles they will why oil.

Similarly, when a Foreign Company set up a business in India they will buy Indian currency using their Home Currency and do the local expenses like paying taxes salaries, and other expenses in Rupees.

Now to increase the speed of transactions banks keep foreign currencies with themselves but there are rules about foreign currency holding which is decided by RBI Reserve Bank of India

Why Indian Rupee is Falling?

Who is creating problems in the story

RBI gives a different type of license to the banks so that they can buy currency like US dollars rubles and etc. RBI is like a Strick principle in the college who is responsible for taking care of the whole college in this college there are various types of entities. so favoring one party is equal to punishing the other party so RBI perpetually finds itself in this dilemma This dilemma has been given a fencing Name Monitory Policy.

RBI looks out for the countries will be it wants the stability of the banking and payment system it also wants people from abroad to invest in India and for India to become an economic powerhouse but the goals need to be realistic as well.

Prevent from any crisis-like situation RBI usually keeps in stock of foreign currencies which are called Foreign Reserves or Forex. So in critical situations if India wants to pay all its International debt India can easily pay to it with the forex reserve this gives a guarantee to World Bank IMF and foreign companies that India is stable.

Now the dollar price is increasing the RBI and the government needs to bring some change in their policies to ultimately increase the supply of the US dollar in the economy in a few ways.

Option 1, RBI can release some of the dollars they hold and sell them in the open market.

Option 2, The government can make it more difficult to import items so that the demand for dollars reduces for example the rate of iPhones will increase so that fewer people can buy the iPhone.

Option 3, the government can make it more attractive for people outside India to buy Indian products so that they Pay a dollar to buy more Indian rupees this are some of the few options which are oversimplified.

RBI on paper by making some changes in their policy can bring $1 equals 1 rupee but if RBI does this there will be some serious repercussions if the dollar and rupee are very valued same then Why will someone hire an Indian IT guy? the company will pay for the US it. Why will some companies open a factory in India?

At the same time, it will become very cheap to leave the country and go abroad so everyone will take their family abroad the truth is one rupee equals $1 which will ruin the country.

So this much power should not be concentrated with anyone institution this is why the dollar and rupee exchange rates depend on the market force basically on a lot of different factors there is no single problem in the story but all the characters are grey

The fight to save the Rupee

The Rupee is fighting three big problems,

The First, is capital outflow – people are selling the Rupee and buying other foreign currencies.

The Second is Rising Crude Oil Prices – with rising oil prices we will need to spend more to buy the same quantity of oil and

The third is The Current Account Deficit – the Gap between imports and export is continuously Rising our imports are continuously Rising and the export are not rising at the same speed

Last year due to Big IPO foreign investors were investing in India today they are withdrawing the investment. US Fed has raised interest rates for the Debt, So the investors who used to take loans and invest here this investor have pulled out their money Plus there are talks of a Global Recession. So overall the business environment is a little low.

Rupees is one of the worst-performing currencies in Asia but still, India is fighting this crisis very efficiently after the Russia Ukraine war and the crisis Bangladesh currencies taka fails 8.2% whereas the Chinese Yuan and South African rand have depreciated by 5.7% and 5% Respective and India is surviving on a 5% currency depreciation.

Just, for example, the cost of tomatoes in India is 40 Rupees per Kg by yesterday but suddenly the vegetable seller increases the price to 4000 Rupees per Kg then certainly No one will buy this tomato or Buy from someone else or will stop eating tomatoes for some days that is how demand a supply works.

But the situation can change if the improve usefulness of tomatoes. what can be more uses for tomatoes? It is not only used for eating but also in ketchup after doing so.

The factories will be built for the manufacturing of ketchup which will give rise to employment and there will be growth in the business only then will the tomato’s increased price will be justified.

As a country, we need to take steps to justify the value of the Rupee plus we need to give attention to tourism due to Covid People from Outside India (Foreign Tourist) have stopped coming to India as a result the inflow of dollars has also reduced. That is what Sri Lanka had suffered – a lack of tourism which shouldn’t happen in India.

Our focus is on useless conflicts and fights like Bollywood gossips religion politics so start giving less attention to these things only than the focus on the things that matter the media the politicians and the common people we all are involved in this and in a way all of us are someway or other responsible for The Rupee Fall Story

Please let us know your thoughts on How Can We Make the Rupee More Stronger? How can we add more value to the Rupee?


Who decides the Rate of the Indian Rupee?

Nobody Decides the rate of Indian Rupees as it is completely dependent on the Market Forces.

What Options are Available with RBI to Make Rupee Strong?

Option 1, RBI can release some of the dollars they hold and sell them in the open market.
Option 2, The government can make it more difficult to import items so that the demand for dollars reduces.
Option 3, the government can make it more attractive for people outside India to buy Indian products so that they Pay a dollar to buy more Indian rupees.
These are some of the few options which are oversimplified.

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