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Depreciation of Indian Rupee has only negative impact on the economy - Group Discussion

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Depreciation of Indian Rupee has only negative impact on the economy - Group Discussion
Group Discussion 06-27-2012 07:11 AM

Depreciation of Indian Rupee has only negative impact on the economy



For

- Due to European financial crisis the value of Rupee has been depreciated which has resulted in an increase in the value of dollar. Thus, affecting the economy.

- The demand of dollar has increased in contrast to that of Rupee and has startled our economy.

- It has resulted in the depreciation of the Purchasing Power Parity (PPP).

- Depreciation of Indian Rupee has resulted in increase in inflation and thus, stagnant growth of the economy.

- Dollar is being appreciated amongst all the currencies including Rupee and has marked an increase in its buyers.

- These frailties and volatilities among the European market is sure to have an impact in the entire Asian markets including India.

- Government would have to pay more in terms of Rupee for its imports. This would lead to rise in fiscal deficit which in turn will raise the level of inflation.

Against

- The exporters gain from the depreciation of Rupee as they get more of the local currency in exchange of the foreign one.

- The depreciating value of Rupee is like a boon to Indian IT sectors as it generates more than 80% of their revenue from overseas market and this will enhance their actual realization of revenue.

- Emigrants living outside India also benefits from this depreciation.
RE: Depreciation of Indian Rupee has only negative impact on the economy - Group Discussion
Rajani Sharma 12-27-2013 11:52 PM

Depreciation of Indian Rupee has only negative impact on the economy


For:

- Due to European financial crisis the value of Rupee has been depreciated which has resulted in an increase in the value of dollar. Thus, affecting the economy.
- The demand of dollar has increased in contrast to that of Rupee which has startled our economy.
- Depreciation of Indian rupee has resulted in the Purchasing Power Parity (PPP).
- It has also resulted in increase in inflation and thus, stagnant growth of the economy.
- Dollar being appreciated amongst all the currencies including Rupee has marked an increase in its buyers.
- Due to the depreciation now government would have to pay more in terms of Rupee for its imports. This would lead to rise in fiscal deficit which in turn will raise the level of inflation. Importers will be affected the most as they will have to pay more in rupees on their imported products.
- Cost of imported goods will become more.
- Oil marketing companies will also be affected by the depreciation of rupee.
- If OMCs increases fuel prices, there will be a considerable increase in overall cost of transportation which will lead to inflation.
- If the depreciation in rupee continues, RBI will have very less room to cut policy rates which in turn will add to the borrower’s woes, who are waiting to get rid of high loan burden.
- Students who are studying abroad also have to bear the burnt of depreciating rupee. Expenses towards the university/college fee as well as that of living will increase, thereby spelling a huge burden on the students.
- Indian rupee depreciation will also affect the tourism.
- Country’s fiscal health will be affected as a falling rupee will add fuel to the rising import bill of the country and thereby increasing its current account deficit (CAD). A widening CAD will definitely pose a threat to the growth of overall economy.
- Industries that depend on imported raw material will cut costs by two ways either by reducing salaries or human resources. Thus there will be shrinking of pay packages.

Against:

- On the contrary, this depreciation of rupee will delight the exporters, as goods exported abroad will fetch dollars which be converted to more rupees. Also, a weak rupee will make Indian produce more competitive in global markets and that will be fruitful for India’s exports.
- The depreciating value of Rupee is like a boon to Indian IT sectors. As the IT sectors generate more than 80% of their revenue from overseas market and this will enhance their actual realization of revenue.
- Emigrants living outside India also benefits from this depreciation. Depreciation of rupee is definitely a good news for the overseas Indians as those who are working abroad will gain more on remitting money to their homeland.
- Earning from exports will increase.

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