What are the causes for sharp depreciation in the value of rupee in the last few years? Discuss the merits and demerits of rupee depreciation on the Indian economy. Highlight the tools used by the RBI to manage currency volatility.

Recent rupee depreciation has sparked concern about devaluation and economic impacts of reduced value of rupee. Causes of depreciation: - Rising US dollar prize due to Trump policies leading to invest pullout - Geopolitical incidents such as Russo-Ukraine War impact industrial resilience - Monetary policy of Central Bank prioritizing export competitiveness - Reverting of FDI to China, India adds to lower production cost

2. Sterilization helps to negate forex currency value manipulation 3. Open-Market Operations change supply of rupees in market and balance volatility 4. Foreign Exchange Reserves held wealth to tackle over and undersupply of rupees 5. Currency swap agreement help increase foreign currency buffers to tackle shocks in forex market Hence currency depreciation has both benefits and drawbacks that are managed by the RBI's monetary policy.