The main reason for the depreciation of the rupee against the dollar is the trade deficit. By the time of independence, our exports were equal to our imports. After that, exports did not increase as much as imports did. As a result, the trade deficit increased. The main reason for this is the burden of oil imports.
The first
compression starts during the 60s
During the '60s our economy faced many ups and downs. Along with wars with China and Pakistan, droughts also damaged the economy. As a result, the fiscal deficit and trade deficit skyrocketed. At the same time, foreign donors have made it clear that we will not help unless trade liberalization is undertaken. On June 6, 1966, Indira Gandhi's government reduced the exchange rate of the rupee to the dollar from Rs.4.76 to Rs.7.5.
During the '60s our economy faced many ups and downs. Along with wars with China and Pakistan, droughts also damaged the economy. As a result, the fiscal deficit and trade deficit skyrocketed. At the same time, foreign donors have made it clear that we will not help unless trade liberalization is undertaken. On June 6, 1966, Indira Gandhi's government reduced the exchange rate of the rupee to the dollar from Rs.4.76 to Rs.7.5.
In the 1990s, the
economy was caught in a deep crisis. India faced bankruptcy due to its
inability to pay foreign debts. As a result, foreign loans had to be made by
pledging the gold held by the RBI. The impact of these harsh conditions also
hit the rupee. In July 1991, in two installments, the RBI depreciated the
rupee's exchange rate against the dollar by 18.5 percent. With that, the
exchange rate of the rupee against the dollar reached from Rs.21.14 to Rs.25.95
within three days.
Unstoppable Fall of
Indian currency
The economic recession that engulfed America in 2008 shook our economy as well. That effect fell on the rupee. By 2009, the rupee's exchange rate against the dollar had depreciated to Rs.46.5. That is, since 2009, the rupee exchange rate against the dollar has depreciated at an average rate of 4.3 percent annually. Even if it settles at Rs.79.5 at present, the big question is how long it will last. Interest rates in the US, investments by FIIs, and monetary, trade, and capital account deficits are going to affect the rupee exchange rate going forward.
The economic recession that engulfed America in 2008 shook our economy as well. That effect fell on the rupee. By 2009, the rupee's exchange rate against the dollar had depreciated to Rs.46.5. That is, since 2009, the rupee exchange rate against the dollar has depreciated at an average rate of 4.3 percent annually. Even if it settles at Rs.79.5 at present, the big question is how long it will last. Interest rates in the US, investments by FIIs, and monetary, trade, and capital account deficits are going to affect the rupee exchange rate going forward.
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