Fall In Indian Rupee:
The Indian rupee is falling continuously against the US dollar, hitting a record low due to US President new tariffs on imports from China, Mexico, and Canada.The exchange rate is the value of one currency in terms of another, determining how much domestic currency is needed to buy one unit of foreign currency.
- Exchange rates fluctuate based on demand and supply in the currency market, influenced by trade, investments, and monetary policies.
Impact of Falling Rupee on Indian Economy
Negative Impacts:
- Higher Import Costs: India imports 80% of its crude oil, making fuel, raw materials, and essential goods more expensive.
- Inflation Surge: Costlier imports increase input costs, leading to higher inflation and reduced purchasing power.
- Widening Current Account Deficit (CAD): Rising trade deficit and costlier dollar-denominated imports worsen India’s CAD, pressuring forex reserves.
- FII Outflows: A weak rupee reduces investor confidence, leading to stock market declines and capital flight.
Positive Impacts:
- Stronger Export Competitiveness: A weaker rupee makes Indian exports cheaper, boosting IT, pharma, and textile exports.
- Higher Remittances: NRIs sending money to India benefit from better exchange rates, increasing remittance inflows.
