RUPEE DEPRECIATION

DEFINITION
Rupee depreciation means that rupee has become less valuable with respect to dollar. If the rupee moves upward from 30 per dollar to 40 per dollar then rupee is said to depreciate. It means that rupee is now cheaper than what it used to be earlier, so if the dollar was Rs 40 and now it reached 56.

CURRENCY DEPRECIATION MEANS

Before I even start into impact of Rupee Depreciation. Let me explain what does the word depreciation mean in the context of currency??? Technically speaking it means that Indian currency is worth lesser now in comparison with some other curreny. For India, this other currency is primarily US Dollars. Lets have a look at the chart of how Indian Rupee has behaved in comparison to US Dollars for past 10 years.

RUPEE AGAINST DOLLAR IN THE YEARS 2003-2012

 One thing you may notice that in last 10 years Dollar was quoting as low as Rs. 39 in 2008 and is now quoting Rs.56. What does it mean ? In order to buy 1 Dollar, we had to pay 39 rupees in 2008. Now in order to buy the same number of dollars, we have to shell out 56 Rs. per dollar (an additional Rs. 17 per dollar is increase in the year of 2008-2012). This reduction in the purchasing power of Rupee in terms of dollars is called Depreciation of Rupee.

WHAT CAUSES TO RUPEE DEPRICIATION

This topic can be much better described in a complete book as the causes of depreciation of a currency are multiple which in combination push and pull the respective currencys quotation in conjunction with other currency. A couple of the main reasons which are currently troubling Rupee are as follows :

Demand Supply Rule Fiscal deficit Oil prices Speculators

EFFECTS
In the globalised world where we are living today, we are no longer shielded from the global economics and product prices. Economies have started taking advantage of countries which are producing specialised products at a cheaper rate and instead of producing them locally, they have started importing them. Economies which have competitive advantage in producing a product at a cheaper price have become exporters, hence opening up the global trade exports & imports. With opening economies, currency exchange rates have started playing an important role in the cost of imports or competitive advantage in exports. Lets start on a positive note detailing upon some of the good effects of rupee depreciation in India.

NEGATIVE EFFECTS
Expensive imports Oil cont

BENEFITS

MAIN REASON FOR DEPRECIATION OF INDIAN RUPEE NOW?

STOCK MARKET PERFORMANCE

WHAT WAY RUPEE DEPRECIATION AFFECT YOU

Investors in import oriented companies will be affected badly in depreciating rupee. For companies, borrowing cost will increase and this will reduce their profit margin. Working abroad, NRIs to send money to india. Studying overseas, pay more rupees to get the same dollar.

 Planning for a foreign vacation, postpone it. Expect foreign tourists in india , because travel cost will be down.

CONCLUSION
I hope this presentation would have highlighted the wild impact of rupee depreciation, how it hits every one, either directly (such as NRIs) or indirectly (such as a person who is fueling up his cars fuel tank). At times controlling the Rupee depreciation is not within the hands of the Reserve Bank of India and the government does need to intervene and take conscientious steps to come up with policy reforms to control the currency movements. Hopefully the Rupee would back trace its steps and come down to more comfortable range of 40s rather than the current dangerous levels of 50s.