Question Q.12GS3GS3

What are the factors responsible for the recent depreciation of the Indian Rupee? Discuss its implications for the economy and suggest policy measures to stabilise the currency.

Introduction

The Indian rupee hit a record low value of ₹86=1 USD in the past quarters.

15 words

Main Body

Factors being depreciation of Indian rupee: (1) Reduced FDI inflow at $70.6 Billion and FII inflow at $4.6billion. (2) Strengthening of US Dollar due to increase federal reserve rates. (3) Capital flight due to calibrated monetary tightening in western countries. (4) Geo-political conditions globally. - Increase in oil prices due to imported inflation. (5) High inflation rate of (PT: 4.47% and CPI-84). (6) High food inflation.

6Rupture of bubble created in Indians stock markets. - Loosing trust in market due to increased volatility. Implications on India's economy: (1) Inverse is current Account deficit and creation of fiscal pressures. (2) Imported inflation due to costly oil prices, consumer goods. (3) Inflationary rates reduced purchasing power domestically. (4) Increased competitiveness of exports in the global market. (5) Push towards import substitution to inflation. (6) Debt financing has become costlier leading to widening of the fiscal deficit. (7) Reduction investment flows and private investment in economy.

8Setback to achieving consistent growth rate of 8% of GDP. Policy measures: (1) Monetary tightening and increasing repo rates to control inflation. (2) Stabilise the volatility→volatility of of the Indian rupee. (3) Import substitution by harnessing indigenous production. - Make In India scheme. (4) Facilitating rupee-denominated loans to curb volatility of exchange rates. - Dominance of Masala Bonds. (5) Crowding in private investment through PPP projects. - Infrastructure projects. (6) Dissemination of inflation under bond to spur capital investment in markets.

236 words1 paragraphs

Conclusion

Indian Rupee has been a stable recently performing currently comparatively calibrated cautious, comprehensive measures are required for rupee consolidation.

19 words

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Page 26

Topper

ANKITA ANIL PATIL

AIR 1402025

Subject & Paper

GS3GS3

Topic

Economic Development

Macroeconomic indicators

Currency Depreciation

Writing Stats

270

Total words

Paragraphs

academic

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