ECO-WEEKLY

Rupee vs Dollar
HISTORICAL FALL IN INR AGAINST USD
On the eve of 72nd Independence Day rupee cross 70.09, of its lowest limit against dollar, Indian rupee
has declined 4.6% to its lowest level. In 2018, from January to August, devaluation of 6.21 rupee is
witnessed. During 70 year of Independence, rupee reaches the level of 70 per dollar where in 1947 1
rupee was equal to 1 dollar, which is now lowest in these 7 decades.

INR 70=1 USD

On 14th August, for the first time in history rupee breached the key of 70 mark against US dollar in Intra
Day Trade to hit the all-time low of 70.09, as concern about Turkey’s economic woes persisted.

However, it closed at 69.89, Next day it’s again reached the level of 70.77 & closed at 70.68 on 16th
August It touched the level of 70.40 & closed at 70.15, on 17th August against US $ it reached the level of
70.11 & closed at 69.76.

CAUSE BEHIND THAT

The Turkish ‘Lira’ is in a free fall having fallen 50% against the dollar in a year. It fell sharply in the mid of
August after US hiked import tariffs on Turkish steel & Aluminium. While these tensions precipitated the
Lira’s descent, there are other underlying causes. The Turkish economy has been in overdrive, centered
on a construction & consumption boom. Inflation was more than 15% in July & the country has had a
high current account deficit & soaring foreign debt. A strengthening dollar & higher interest rate in U.S.
have compounded the lira’s troubles.

Investors see this as a bad news for global trade & are dumping Lira, as well as other emerging market
currencies & going for the safety of US dollar backed assets.

The increase in demand for the US dollar is making stronger against most currencies, including major
one like Euro & pound. On 13th August the Pound Sterling was trading near 2018 lows, The Euro declined
to 13-months low, the Russian Ruble lost 2% while South African Rand plunged 7%, thus it was a world
wide effect.

EFFECT ON RUPEES
As the dollar become stronger the rupee turns weaker, rupees weakness is also driven by the fact that
India is a net importer & thus need more dollar every year to import. Capital outflow has also effected
the rupee. Trade deficit has increased, it reached the level of 18 billion dollar which is highest in these 5
year. Trade deficit is a burning issue in Indian economy now days.

US & China trade war is also one of the reason of falling rupees price against dollar. Washington &
Beijing kept traders & analysts in uncertainty.
The prices of crude oil in International oil markets rose to $72.89 a barrel, their highest level in week. Oil
edges up on US sanctions against Iran, this trade dispute is one another important reason of fall in
rupee.

IMPACT ON INDIAN ECONOMY

Rupees downfall impact on Indian economy will create a huge price high. Imported goods will became
costly, Price of Petrol & Diesel will be high, Raw materials, Petroleum products, Crude oil by products,
Electronics, Mobiles, Television, Refrigerator, Auto mobiles & all the tools & machinery which are
imported from abroad will effected by these.

This downfall in rupees effect will be seen in Long-term. Dollar is flowing from our country because
dollar’s demand in international market is very high. RBI sold out 24 billion dollar from its foreign
exchange reserve to stimulate rupee. Continuous devaluation of currency is not good for any economy
& Indian rupee is continuously falling against American dollar from 2012 to 2017 22% downfall is
recorded in rupee against USD in 5 years. According to an estimation, Oil import expenditure will
increased by 26 billion dollar in this year, if in the year end rupees price will be same or near to 70
against USD. According to experts of various industry govt. should take immediate action against that.
Well according to govt. officials & experts rupees fall against dollar is a good sign for the Indian economy
especially for export industry. Export will increase if the same trend will continue.

INR AFTER INDEPENDENCE

1

1947 1973 1983 1993 2003 2013 2018

-7.66

-10.11

-28.14

-46.6

-58.53

-70.08

ANKUR BAGCHI

M.A. (Previous Year) 2018