VALUATION

OF THE
INDIAN
RUPEE
INTRODUCTION
 The first “rupee” is widely believed to have
been introduced by Sher Shah Suri.
 It was used for a very long period.
 The value of a Rupee was equal to 1 US
dollar at tge time of independence.
 In 1991, that is after Libralization,
Privatization, Globalization, India adopted a
flexible exchange rate system.
WHY IS THE VALUE OF A RUPEE
FALLING AGAINST DOLLAR?
Import of crude oil
 India imports 80% of the crude oil
requirement.
 The demand of crude oil has increased
by 25% since 2017.
 We have to pay in dollars, which
increases the demand for dollars.
Increase in trade deficit
 Low capital inflows
 Foreigners sell their
investments in the
stock market.
 They postpone their
investment
Devaluation pressure

• The demand
supply gap
between Rupees
and Dollars leads
to devaluation.
• People sell Rupees
to buy dollars.
Increasing fiscal deficit
ADVANTAGES OF A WEAK
RUPEE
 Benefit to exporters.
 More number of shares can be bought by foreign
investors.
 It causes a rise in tourism, especially medical tourism.
 Import substitutable products get an indirect shelter on
account of a weak currency.
DISADVANTAGES OF A WEAK RUPEE
 It increases the current account deficit increases inflation.
 It increases cost of education abroad.
 Certain sectors which are dependent on imports become
uncompetitive
 It affects countries which have borrowed funds from other
countries.
IMPACT
 Imports become expensive and inflation rises.
 Increase in price causes decrease in sales hence
causing a decline in the GDP.
 A consumer has to pay more for commodities.
 Tourism gets encouraged.
MEASURES TO STOP THE FALL IN
THE VALUE OF A RUPEE
 The government of India and the Reserve Bank of India (RBI) are
responsible for solving the problem of weakness of rupee.
 Production in all the sectors needs to be increased.
 Bringing down the demand for petrol and petroleum products can
too play a vital role in strengthening the rupee.
CONCLUSION

The fluctuations in the value of Indian rupee are a

matter of the economic health of the country
than the fluctuations in the prices of crude oil in
the international market. The mechanism of ups
and downs in the value of the Indian rupee is
matter of sheer economics which needs to be
read between the lines.
Thank you.