How Rupee Depreciation Affects us?

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It is really painful to see Rupee going down the drain at Rs 60+ against a dollar. Now the depreciation of rupee has a cascading effect. You can check Rupee Appreciation or Depreciation Effect on companies Here. Have a look at the way one thing leads to another:
  • Depreciation causes imports to become more costlier and it leads to higher inflation. Higher import costs leads to widening current account deficit (CAD).
  • High inflation forces RBI to keep interest rates high, and thus amount is not released in banking system and cheap loans are not available which leads to slow growth.
Govt Plan of Action

 Govt need to ensure that the current account deficit (CAD) is kept under leash else we may have a balance of payment crisis (similar to 1991) and this high CAD is further depreciating Rupee as demand is high and inflow of dollar is low. Thus govt need to make sure that we make India an attractive investment destination and for that they have to get cracking and make sure that corruption and governance issues are taken care in a positive way.

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