The rupee is in a free fall. And the commentary is mixed. Some call it natural adjustment, some are worried. Share market tanked.
So can we discuss the impacts of falling rupee ??
- One which is obvious is that it makes exports more competitive and imports costly.
- Other is that it makes investors lose faith in economy. The 450 point slide in BSE !!
For me, as a layman, it makes no difference. My Amul Mango Lassi still costs 20 bucks a pop at ORN Mother Dairy.
So, what are the other pros and cons of it ??
Economy enthusiasts please contribute...
Comments
-forex will have to be shaded to maintain equilibrium in value of rupee
-long term bond yield
-Depreciation of currency is, generally, coincided with inflation
-for the country like India which imports more than exports, it is always bad fiscal condition..this will create BOP problem and again forex will have to face pressure
It also means exports may increase hence decreasing the trade deficit. However large chunk of our exports are import dependent (jewellery needs gold import and petroleum products need petroleum) hence exports might not increase.
Oil shock, and other costly imports would not decrease their demand as these are essential products. And these products tend to have a cascading effect increasing prices of other products like vegetables (oil and fertilizer costs), logistics etc. Hence inflationary pressure (supply side)
The fall of ₹ shows that investors don't believe indian market to be as valuable and are pulling out funds. Maybe it's just due to rise in rates of US fed, but it forecasts a gloomy future for indian economy.
Tourism sector might get a stimulus.
The CAD is off the roof. 2.4% absolute disaster. Could lead us to a crisis.
This might perhaps be only a signal. With oil prices likely to increase even more - it shows our vulnerable position just like 1991
Initiatives such as masala bonds suffer.
PS - I'm not an economics graduate. These are only general studies pov answers
Can you please elaborate what is meant when you say US Fed raised rates ??
Seemingly I can't understand this simple thing which is so much talked about...
What exact rate do we talk about when we say US Fed raised rates...
Thanks...
So when it raises interest rates, banks increase interest rates and return on (new)bonds increases for investors. So they pull out of india
यह सही है की रुपैये की गिरती कीमत से निर्यात आधारित फर्मो को लाभ मिलता है , परन्तु ये तात्कालिक है।
यहां चीन का उदहारण देना उपयुक्त होगा। चीन द्वारा निर्यात आधारित अर्थव्यस्था को ध्यान में रखकर भारी औधोगिकरण किया गया , दुनिया के कोने कोने में अपने विनिर्मित उत्पाद को खापांने के लिए उसने सोची समझी रणनीति के अंतर्गत अपनी मुद्रा को अवमूल्यन किया और अपने उत्पादों का बढ़ाया। इस नीति के द्वारा उसके उत्पाद सस्ते हुए और चीन की आय और उत्पादन दोनों में वृद्धि देखने को मिली।
भारतीय सन्दर्भ में देखा जाये तो अर्थव्यस्था के औधोगिकरण का स्तर चीन के समान नहीं है , अतएव निर्यात आधारित अर्थव्यस्था भी दूर की कौड़ी है। अंततः रुपए की गिरती कीमत द्वारा सिर्फ आर्थिक प्रतिष्ठा को हानि हो रही है , निवेशकों में नकारात्मक सन्देश जा रहा है , तथा निर्यात फर्मो का लाभ भी तात्कालिक है। इस स्थिति को शीघ्र समाप्त करने होगा।