bet sadathunnisa college

136
Bismillahnagar, Bannerghatta Road Cross, Bangalore -560029. Ph.: (080) 2668 8154, Email : [email protected], [email protected] Website :www.degree.betinstitutions.org www.betdegreecollege.com ONE DAY STATE LEVEL SEMINAR ON FALLING RUPEE VALUE AND ITS IMPACT ON INDIAN ECONOMY JANUARY 12th 2019 BET SADATHUNNISA COLLEGE Affiliated To Bengaluru Central University, NAAC Accredited, ISO 9001:2015-Certified, Minority Institution

Upload: others

Post on 30-Jan-2022

0 views

Category:

Documents


0 download

TRANSCRIPT

Bismillahnagar, Bannerghatta Road Cross, Bangalore -560029.Ph.: (080) 2668 8154, Email : [email protected], [email protected] :www.degree.betinstitutions.orgwww.betdegreecollege.com

ONE DAY STATE LEVEL SEMINAR ON

FALLING RUPEE VALUE AND ITS IMPACT

ON INDIAN ECONOMY

JANUARY 12th 2019

BET SADATHUNNISA COLLEGEAffiliated To Bengaluru Central University, NAAC Accredited,

ISO 9001:2015-Certified, Minority Institution

hhh h

ISBN:�978-93-5346-393-9No�part�of�this�publication�may�be�reproduced�or�transmitted�in�any�form�by�any�means,�electronic�or�mechanical�including�photocopy,�recording�or�any�information��storage��and�

retrieval��system�without��permission�in�writing�from��our�college

DISCLAIMER

The�authors�are�solely�responsible�for�the�contents�of�the�papers�compiled�in�this�volume.�The�

publishers�or�editors�will�not�take�any�responsibility�for�the�same�in�any�manner.�Errors,�if�any�

are�purely�unintentional�and�readers�are�requested�to�communicate�such�errors�to�the�editors�

or�publishers�to�avoid�discrepancies�in�future�

hhh h

ACKNOWLEDGEMENTS

������Higher�Education�is�a�spine�for�upliftment�of�a�society�and�major�driver�of�economic�competitiveness�in�an�increasing�knowledge�driven�economy.�The�concerns�for�quality�of�programmes�in�society�becomes�a�key�factor�through�quality�enhancement�in�the�higher�education�institutions.

�������It�is�our�pleasure�to�present�the�publication�of��papers��presented�in��One�Day�State�Level�

Seminar�on�"Falling�Rupee�Value�and�Its�Impact�On�Indian�Economy"�with�ISBN��and�thank�

the�esteemed�management�members� for� their� � incredible�amount�of� � support,� �guidance�

and� encouragement� in� all� our� endeavours� showing� us� that� we� � can� achieve� more� than��

what�we��think,��as�that��has�increased�our��self�confidence�tremendously.

�����We�would�also�like�to�express�our��sincere�gratitude�to�Dr�Mohammed�Khaiser�Ahmed��Member�Governing� Council� of� our� college� � for� providing� us� with� invaluable� guidance,� comments,�suggestions� � and� motivating� us� to� work� harder� � throughout� the� seminar.� We� � would�continue�to�look�up�to�you��sir�for�advice�and�guidance�in�the�future.

We� � take� this�opportunity� to� thank�once�again�all�of� the�participants�of� � the� seminar,� invited�

speakers� Dr.� Xavier� V.K.,� � Prof.� and� Head� Department� of� Economics� � Jain� University� and�

Dr.�M�Seenuvasan�Assistant�Advisor�Department�of�Economic�Policy�and�Research��Reserve�Bank�

of� India,� � � presenters� and� audience� alike.�We�would� also� like� to� extend� our� gratitude� to� the�

paper� presenters� � who� have� submitted� their� papers� for� consideration� in� this� book� and� for�

having�so�generously�shared�their�time�and�expertise�

We� also� � wish� to� thank� our� colleagues� and� students� who� contributed� greatly� � for� the�success�of�this�seminar�,while�we�cannot�mention�each�one�by�name�we�hope�that�they�will�take�this�as�a�personal�thank�you.

Mrs. Sumaiya Fathima Principal

B.E.T�Sadathunnisa�College�

hhh h

BRIEFPROFILEOFTHECOLLEGE

BETSADATHUNNISACOLLEGEMANAGINGCOMMITTEE

BET��Sadathunnisa�College�was�established�in�the�year�1998�is�managed�by�Bismillah�Educational�Trust.� The� establishment� of� the� trust� dates� back� to� 1985� ,� started� � off� as� a� Primary� school,� it�was�upgraded� to�High�School,�PU�College�and� then� �Degree�College�and�also�has�a�branch�at�Madinanagar��at�BTM�II�Stage�for��students�from�Primary�to�Tenth�Standard

Despite�the��status�as�a�minority�institution,�our�college�is�imparting��high�quality�education�,�offers� � B.A.,� � B.� Com�BBA�&�BCA� courses� affiliated� to�Bengaluru�Central�University� � �NAAC�accredited�and�ISO�9001:2015�certified��and�recognized�by�UGC�under�sec2(f)�.�Our�College�also�offers�one�year�Certificate�course�in�Kannada�for�non�–Kannada�speakers.�We�also�have�an�active�NSS�Unit�and�also�have�a�vibrant�Alumni�base.

We�are�a�team�of�dedicated,�highly�qualified�and�well�experienced�teachers�who�create������an�exciting�environment�for�teaching�learning.

hhh h

� � � � �The�college�has�been�built�with�a�very�good�infrastructure.� It� is�all�done�with�a�focus�� to� provide� the� best� possible� facilities� for� the� student� community� as� well� as� the� staff�members,�well�ventilated�and�spacious��class�rooms�,�well�equipped���two�computer�labs�,�seminar� hall� which� is� equipped� with� modern� and� standard� � audio,� visual� aids� and�presentation�tools.��Educational�and�training�programms�for�the�students�and�faculties�are�conducted�in�the�seminar�hall�.��The�teaching�staff��has�participated�and�presented�papers�in�various�national�and�international�conferences.�

� � � � � � Our � auditor ium� is � featured� with � a l l � the � equipments � which � � provide�our� staff� and� students�with� the� � best� of� facilities,� equipped� � with� full� -fledged� audio� visual�equipment�and�digital�projection�system.�It����is�the�stage�for�numerous�important�programmes��throughout�the�year�.

������We�also�have�an�indoor�stadium�to�augment�the�sports�and�physical�educational�needs�of�our� students� .� The� entire� campus� is� under� surveillance� aided� by� CCTV� cameras.�� To� ensure� punctuality� in� teaching� staff� bio� metric� machine� is� installed.� We� � have�an�excellent�academic�Co-ordination,��methodology�and��we�are��producing�excellent�results��in�terms�of�students�pass�percentage�.

������We�also�facilitates�the�process�to�get�scholarship�to�students�under�various��governmental�and� nongovernmental� schemes,� Students� with� � good� academics� ,� economically� poor� and�underprivileged�students�avail�these�scholarships.

We� have� � canteen� with� adequate� seating� capacity� for� students� .The� cafeteria� provides�hygienic�and�nutritious�eatables�for�the�faculties��and�students�at�specially�subsidized�rates�.

������The�management�team�is�simple,�honest�and�highly�approachable,�keep�a�watchful�eye�over�the�affairs�of�the�institution�and�provide�good�support�.We�at�BET�are�committed�to�impart� � value� based� quality� education� which� envisages� the� � holistic� development� of�students� � and�we� believe� it� is� our� duty� to� give� tomorrow's�world� � a�well� educated� and�disciplined��young�generation�.

����������������������������������������������������������������������������������������������������������������������������������Thank�You

hhOUR�VISION��

To�Develop�In�Students�Passion�Of�Excellence�&�Perfection�Through�Value�Based�Holistic�Education”

�MISSION�Empower�&�Prepare�The�Women�To�Face�The�Challenges�Of�Life�

And�To�Be�A�Good�Individual�And�An�Asset�To�The�Family,�Community�&�The�Nation

PREFACE

� � � � � The� � fall� in� the� value�of� the�domestic� currency� � is� caused�by� the�demand� for� foreign�currency�exceeding�its�supply�in�the�market.�In�such�a�situation�one�has�to��pay�more��than�before��to�get�units�of�foreign�currency.�This��fall�takes�place�in�the�market�and�on�its�own.�Market�determined�exchange�rate�serves�the�purpose�of�aligning�the�domestic� �economy��with��the��world��economy��was��the��price��route.��As��consequences��the�domestic�price�gets��linked�up��with�those��of�the��world�price.�With��the�liberalizations��and�globalization�of�the�economy� in� recent� years,� imports� are�bound� to� increase.� The� lessening�of� restrictions�on�imports�and�lowering�of�tariff�on�imports�which�the�economic�reform�implies,�an�increase�in�imports�has�in�fact�taken�place.�Again�with�trade�having�become�an�important�element�of�the�new�strategy�of�growth.�

�������The�fall�in�the�value�of�currency�affects�a�lot�of�economic�growth�indicators.�Depreciation�of� rupee� reduces� the� inflow� of� foreign� capital,� rise� in� the� external� debt� pressure,� and� also�grow�India's�oil�and�fertilizer�subsidy�bills.�The�most�positive�impact�of�depreciation�of�rupee�is� the� stimulation� of� exports� and� discouraging� imports� and� thus� improving� the� current�account� deficit.� But,� even� after� significant� increase� in� the� exports� and� sales� in� this� year,�Indian� companies� are� reporting� huge� foreign� exchange� losses� due� to� the� depreciation� of�Indian�rupee.�This�declines�the�overall�profitability�of� these�companies.�As� far�as� imports�are�concerned,�for�a�country�such�as� India,� imports�are�necessary.�Grim�global�economic�outlook�along� with� high� inflation,� widening� current� account� deficit� and� Foreign� Institutional�investment��outflows�have�contributed�to�this�fall.�RBI�has�responded�with�timely�interventions�by�selling�dollars� intermittently.�But� in�times�of�global�uncertainty,� investors�prefer�USD�as�a�safe� haven.� To� attract� investments,� RBI� can� ease� capital� controls� by� increasing� the� Foreign�Institutional�investment����limit�on�investment�in�government�and�corporate�debt�instruments�and�introduce�higher�ceilings�in�ECB's.�Government�can�create�a�stable�political�and�economic�environment.� However,� a� lot� � � depends� on� the� Global� economic� outlook� and� the� future� of�Eurozone�which�will�determine�the�future�of�INR.

hhh h

Though�we�cannot�control�some�factors�like�increasing�crude�oil�prices,�trade�wars�etc.,�we�can�take�some�steps�to�strengthen�rupee�or�at�least�to�prevent�further�fall�of�the�value�of�our�currency.�Steps�to�retain�trust�of�investors,�to�attract�more�FDI,�to�reduce� the� dependence� on� imports� by� encouraging� domestic� manufacturing�industry,� investing� more� on� the� development� of� renewable� energy� resources� to�reduce�crude�oil�imports�will�help�in�strengthening�Rupee.

hhh h

HONSECRETARY'SMESSAGE

GREETINGS��TO�ONE�AND�ALL�BET�INSTITUTIONS�-�A��UNIQUE�CAMPUS��FOR�VALUE�BASED�QUALITY�EDUCATION�AND�ACADEMIC�EXCELLENCE�Preparing�our�students�to�take�a�leading�role�in�society�and�providing�an�engaging,�caring�and�supportive�learning�environment.�

� � � � � BET�SADATHUNNISA�COLLEGE�established� in� the�year�1998� �managed�by�Bismillah�Educational�trust�,�a�nonprofit�organization�devoted�to�the�positive�change�in�education�that�promotes�high�academic�achievement�for�all�students.�and��is�affiliated�to�Bengaluru�Central�University.

������The�trust�runs���two�institutions�from��Primary�till�tenth�standard�at�Bismillahnagar��and�Madinanagar� � � and� a� � PU� College� offering� courses� � PCMB,� HEBA,� EBACs� and� HEPS� � a�coaching�centre�for�CET�students��along�with�our�Degree�College�.

�����We�are�committed��and�ensure�that�all�the�academic�and�other�activities�take�place�on�time�and�with�quality�and�ensure�that�BET�stands�as�one�of�the�best�Institution,�with�a�view�to� enhance� knowledge� � on� falling� rupee� value� and� its� impact� on� Indian� Economy.� � Our�Institution�had�organized�a�state�level��seminar�to�gain�perspectives�and�points�of�view�that�you�might�not�have�otherwise� considered�and�an�opportunity� to� clarify� and�deepen�our��understanding�on�the�topic.

�����I���congratulate��and�wish�all�the�best�for�the�participants��for�their��commitment�and���active�participation�and�wish�success.��I�would�also�like�to�express�my�appreciation�to����seminar�conveners��for�making�this�extraordinary�conference�a�possibility.�

��������������������������������������������������������������������������������������������������������������Thank��you�for�your�attention,����������������

Mohammed Saifulla���������������������������������������������������������������������������������������������������������������Hon.�Secretary

hhh h

SEMINARCONVENERS

�����The�word�seminar,�derived�from�the�Latin�word�seminarium,�means�"seed�plot".�Seminars�give� such�elaborated�platforms�where� the� thoughts� from�different�angles�are�confronted�with�and�a�concrete�solution�to�the�problem�is�tended�to�identify.�Seminars�are�not�simply�about�learning�in�a�given�subject�discipline�they�are�also�about�learning�to�learn.

������One�Day�State�Level�Seminar�on�Falling�Rupee�Value�and�Its�Impact�on�Indian�Economy�which�was�held�on�January�12th��2019��provided�a�forum�for��academicians�and�researchers��to�interact�and�exchange�views�on�the�topic��as�rupee�value�is�one�important�feature�which�reflects�the�economic�stability�of�the�country.��.In�the�current�scenario�depreciation�of��Rupee��has�become��a�big�tension�to�the�Indian�Government��and��breaking�news�for�news�channels�these� days.� The� RBI� and� other� Government� agencies� are� doing� their� best� � to� tackle� this�situation.

� � � � We� would� like� to� thank� the� principal,� speakers� and� participants� for� their� valuable�contributions�to�the�success�of�the�seminar��and�to�enable�us�to�present�the�publication�of�the�proceedings�with� ISBN.�An�opportunity�was�given� � to�us� to� review�abstracts� ,� running�the� � session� ,introducing� the� speakers� ,� watching� presenters� do� not� � go� over� time� and��facilitating�question�and�answer�sessions,�all�in�all�it�was�a�great�leadership�training�exercise�.

������We��acknowledge�our�sincere�thanks�to�the�Worthy�Management,�Principal,�Teaching�and�Non-Teaching� staff� for� the� successful� accomplishment� of� the� task� undertaken� by� the�college.

Mrs. Aysha Thasneem Ms. Nasreen Taj M

hhh h

JANUARY12th2019-SEMINARREPORT

�����One�Day�State�Level�Seminar�on�“Falling�Rupee�Value�and�its�Impact�on�Indian�Economy”�was�organized�by�Department�of�Economics�and�Commerce”.�The�highlight�of�the�seminar�was� the� eminent� speakers� who� shared� their� knowledge� and� experiences� with� the�participants�and�students�in�their�respective�sessions.

� � � � � � � Dr.� Khaiser� Ahmed,� � Prof� and�Head�of�Department� of� Economics�Abbas� Khan� PG�college� for� women� delivered� keynote� address� on� the� value� of� Indian� Rupee� being�plummeting�low.�A�brief�coverage�on�Rupee�depreciation�causes�and�consequences�was�covered,�it�also�highlighted�historical�data�of�currency�decline�of�not�only�India�but�few�more� countries� as� well� and� how� it� has� brought� the� entire� nation� to� the� brink� of� a�financial�crisis�and�sullied�global�image.

������Dr.�Xavier�V.K.,��Prof�and�HOD�of�Economics�Jain�University,�one�of�the�most�highly�respected�guest�of� the�day�gave�a�comprehensive�overview�of�Exchange�Rate�Depreciation�and�Export�Competitiveness� through� his� powerpoint� presentation� which� was� well� structured� with� lots�of�information.

� � � � � Dr.� M� Seenuvasan� Assistant� Adviser� Department� of� Economic� Policy� and� Research.��Reserve�Bank�of�India,�addressed�the�audience�on�the�measures�taken�by�Reserve�Bank,�in�its�capacity� as� India's� Central� Banking� Institution� and� Monetary� Policymaker� who� has� at� its�disposal�a�number�of�instruments�with�the�capability�to�arrest�Rupee�depreciation.

� � � � � �Papers�were�presented�based�on�the�themes�outlined�for�the�seminar.�Seminar�received�an�overwhelming�response�from�PG�Students�and�teaching�faculties��from�various�colleges�like�Mount�Carmel�college,�St�Hopkins�College,�Crescent�College,�Government�first�grade�College�Frazer� Town� and� Chickballapur,� Government� RC� College,� JUU� College,� Maharani's� College,�Research�Scholar�from�Tumkur�etc.

Post�Lunch�Participants�of�the�seminar�posed�for�a�group�photograph.�The�Feedback�forms�filled� by� the� delegates� after� the� completion� of� the� seminar� validate� our� claims� as� the�delegates�appreciated�the�way�seminar�was�organized.�They�enthusiastically�congratulated�the� college� on� the� relevant� theme� of� the� seminar� and� were� also� very� happy� with� the�hospitality�accorded�to�them.

ONE�DAY�STATE�LEVEL�SEMINAR�ON�“FALLING�RUPEE�VALUE�AND�ITS�IMPACT�ON�INDIAN�ECONOMY”

THJANUARY��12 ��2019

SL.�NO� TITLE� NAME�OF�THE�AUTHOR�&�CO�AUTHOR� PAGE��NOS�

KEYNOTE�ADDRESSFalling�Rupee�Value�and�its�Impact�on�Indian�Economy�

Dr.�Mohammed�Khaiser�Ahmed�Prof.�&�Head��Department�of�Economics

Abbas�Khan�College�for�Women

Exchange�Rate�Depreciation�and�

Export�Competitiveness

Dr.�Xavier�V.�K.Professor�and�Head,�Department�of�Economics,�Jain�University,�Palace�Road,�Bangalore�-�1

“A�study�on��falling��rupee��value��its��impact�on���industry�and��service�sector��in��India”

Afzalunissa�Uzma�Alfa�����Roshni�Tabassum�PG�Department�of�Commerce�&�ManagementMount�Carmel�College,�[email protected]

Falling�Rupee�value�effect�on�financial�services�of�commercial�banks

Thaseen�SultanaAssistant�ProfessorGFGC,�[email protected]

The�weakening�Rupee�and�mutual�fund�returns

Imtiaz�Begum�IAssistant�professor

GFGC,�Chickballapur.

[email protected]

Devaluation�of�Rupee�and�its�impact�on�consumer�goods

TahseenAssistant�Professor�,�GOVT.�R.C.�College�Bangalore.�[email protected]

Rupee�Depreciation�and�its�Impact�on�Indian�Economy

P.�Victoria�EvangelineMasters�in�International�Business�(II�Year)�[email protected]�Department�of�Commerce�&�ManagementMOUNT�CARMEL�COLLEGE,�AUTONOMUS

Impact�of�falling�economy�on�medical�and�educational�tourism

Babli�Kalita#�8134934490 , [email protected]�S,�#��[email protected]�Chandrasekar,��#�8951175005PG�Department�of�Commerce�and�ManagementMOUNT�CARMEL�COLLEGE,�AUTONOMUS

1

2

3

4

5

6

7

8

“�A�study�on�falling�Rupee�Value�and�its�impact�on��tourism�(�health�and�education��in�India�”

Diana�f.r.i.mJennifer�p�PG�Department�of�Commerce�&�ManagementMOUNT�CARMEL�COLLEGE,�[email protected]

A�study�about�depreciation�of�Indian�Rupee�value

Ms.�Komal�GuptaAssistant�Professor�Department�of�Commerce�and�Management�BET�Sadathunnisa�[email protected]

Impact�of�Rupee�Depreciation�on�India's�Balance�of�Payments

Dr.�Mohammed�Ashfaq�AhamedAssistant�Professor�in�EconomicsCrescent�Group�of�InstitutionsMosque�Road,�Basavanagudi,�Bangalore�–�[email protected]

Impact�of�falling�rupee�on�tourism Ms�Farheen�Najma�Faculty,�Department�of�Commerce�and�ManagementSt.�Hopkins�College�of�Management�[email protected]

Falling�value�and�its�impact�on�the�Industry�and�Services�sector

Ms�Nasreeen�Taj�HOD�Commerce�BET�Sadathunnisa�College�[email protected]

“A�study�on�falling�Rupee�value�and�its�impact�on�Indian�economy”

Nousheen�imran�Maseeha�arjumand�[email protected]�Department�of�Commerce�&�ManagementMOUNT�CARMEL�COLLEGE,�AUTONOMUS

Falling�Rupee�Value�And�Its�Impact�On�Household�Sector

Dr�Niloofer�MirzaMA���Phd�UGC�[email protected]�Sadathunnisa�Degree�College

Fall�in�the�Rupee�value:�causes�and�its�impact�on�Indian�economy

Associate�Professor.S.C�Vijayashree.�

Department�of�Economics.Maharani�Women,s�

Arts�Commerce�&�Management�College,�

[email protected]

Falling�Rupee�Value�and�its�impact�on�Imports

Research�ScholarTumkur�University�[email protected]

1

2

3

4

5

6

7

8

“A�study�on�falling�Rupee�Valueand�its�impact�on�tourism�(healthand�education�in�India”

Diana�F.R.I.M

Jennifer�P

PG�Department�of�Commerce�&�Management

Mount�Carmel�College,�AUTONOMUS

[email protected]

A�study�about�Depreciation�ofon�Indian�Rupee�value

Farheen�Taj�S

M�Com�II�Year,�Central�College

Bangalore�University�Board,�Bengaluru

[email protected]

Impact�of�Rupee�Depreciationon�India’s�Balance�of�Payments

Chowdappa�C.B��M.A.,M.Phil.,�M.Ed,�LLB,�K-SET,(�Phd)Assistant�ProfessorSEA�Degree�College

KEYNOTEADDRESS

Dr. Mohammed Khaiser AhmedProf. & Head Department of Economics

Abbas Khan College for Women

“FALLING RUPEE VALUE AND ITS IMPACT ON INDIAN ECONOMY”

�����Over�the�years�the�Indian��Rupee��has�shown�a�continous�decline�and�the�decelerating��trend�is�unabated,�unchecked�and�has�become�secular�in��nature.

�����In�recent�times�the�Indian �has�plummeted,��nosedived�and�reached�its�nadir�level��on�thOctober� 10 � 2018� ,� touching� 74.35� against� dollar� .� Indian � is� the� worst� performing�

currency�in�Asia.The�Indian�has��seen�a�phenomena�decline�in�its�value�vis-à-vis�$�of�US�and�other�hard�currencies�such�as�Euro,�Pound�,Lira,�D��Mark,�Yen�and�Deutshe�currencies�.��

�����The��has�been��badly�battered,�bruised�and�decimated�in�2015�it�lost��12%�to�the�US�currency.In�2018�it�lost��by�13%�against�dollar,�other�badly�hit�emerging�market�currencies�are�Argentina�PESO��-�52%,��Turkish�Lira�-40%,Indonesia�Rupiah-9%

Since�December2007�the�percentage�change�in�currency�value�against�the�Dollar�

As�per�Bloomberg�Data

China's�Yuan������������������������+6.4%Taiwana��Dolla��������������������+5.2%Singapore�Dollar����������������+4.7%Thai�baht�������������������������������+2.8%Hongkong�Dollar����������������-0.6%South�Korean�WDN������������-16.9%�Malaysian�ringgit����������������-20.1%Phillipines�PESO������������������-23.5%Indonesian�Rupiah�������������-36-8%Indian�Rupee������������������������-45.5%

1913 0.091925 0.11947 4.161950 4.791954 4.761970 6.451982 9.461984 11.361988 13.921990� 17.51991 22.751993 30.491996 35.431998 41.26

1999 43.062001 47.192002 48.612006 45.312007 41.312009�Recession 48.412012 53.442013 56.572014 62.332015 62.972016 66.462017 67.742018 70.04

th10 �Dec�2018� 74.35thJanaury�10 � 69.0

Year�wise�fall�in�Rupee�value�V/S�Dollar

At�present�Indian �has�been�oscillating�,�fluctuating,�dingling�and�dangling�around��68.70

Indian�Rupee�v/s��other�currencies

1966 2007 2016British�Pound 13.33 80.63 110Saudi�Riyal 1.41 18.00 18.5Singapore�Dollar 2.07 33.60 51Malaysian�Ringgit 1.55 12.36 16Kuwaiti�Dinar 17.80 144.6 151Canadian�Dollar 5.9 42.92 48

What are The Proximate Causes For The Recent Slide

Among The Immediate Triggers

Global Factors

Sharply� rising� dollar� price� of� petro� products,�mainly� due� to� cut� in� supply� of� crude� to�world�market�from�Iran�because�of�US�sanctions�and�more�generally��the��production�cut�by�OPEC�an�Russia�and�hence�the�hike�in��35.4%�of�our�total�imports�in�import�bill.�On�the�other�hand�exports�have�remained�virtually�stagnant�leading�to�rising�Trade�and�CAD��&Adverse�balance�of�payments.�

Problem�in�Capital�Account�as�funds�are�flowing�out�of�India�as�a�part�of�a�more�general�movement�from�the�emerging�markets�to�Dollar�dominated�Assets.�This�is�in�response�to�higher�Interest�rates�already�announced�by�US�Federal�Reserve.

1

2

Global�uncertainty�created�by��worsening�macroeconomic�and�exchange�rate�situation�in�several�emerging�market�economies��particularly�Turkey�and�Argentina

Beginning�of�Trade�war�between�US�and�China.�In�any�Uncertain�global�environment�funds�flow�towards�the�safe�heaven�i.e.,�dollar.

Increasing�Trade�deficit�of�India�(Merchandise)��increased�from�89�US�Billion�in�2007-08�to� 162�US� Billion� in2017-18� ,� for� the� current� year� India's� � Trade� deficit� increased� to�around�$��63�US�billion�in�April�2018�against�$�52�US�Billion�in�corresponding�last�year.

The� last� time� CAD� made� headlines� was� during� � 2012-14� when� it� breached� the�estimated�sustainable�threshold�of�25%�of�GDP.�The�CAD��was�in�the�backdrop�of�rising�Crude�Oil�Prices,�large�Gold�Imports,�coupled�with�rupee�depreciation�and�the�flight�of�Foreign�Portfolio�investment.��While�this�might�bear�semblance�to�the�situation�today,the�global�headwinds�at�present�are�far�more�ominous�than�in�2012-13.

India's�Imports�nearly�80%�of�the�oil�requirements,�which�made�up�35.4%�of�our�total�merchandise�imports�in�August�2018�up�from��28.6%�in�January�2018.�The�large�share�of�Oil�imports�in�India's�Import�basket�makes�the�CAD���swell�when�oil�prices�rise.�Brent�crude�prices�touch�from�$�69.08�a�barrel�in�January�to�touch�$86.74�in�the�first�week�of�October�2018.However�since�there�is�decline�in�Oil�prices��the�Oil�imports�are�paid�for��in�dollars�and�the�depreciating�rupee�has�added�fuel� to� fire� .The�Rupee�depreciated�from�68.33�a�dollar�in�January�2018�to�74.48�(October�11th��2018).The�CAD�is�financed�through� surplus� in� the� capital� Account.� However� in� 2018� rising� crude� prices,�depreciating�Rupee�and�the�financial�sector�Crisis�(NPA's)�has�forced�foreign�investors�to�shed�nearly�$�13�Billion�in�equity�and�debt.

Rising�Interest�rates�in�the�US�and�the�tax�reforms�brought�in�by�Donald�Trump�to�tax�the� undistributed� overseas� profits� of� American� Companies� have� made� investors� to�leave�India.�The�dumping�of�India�securities�by�Foreign�Investors�will�make�it�difficult�to�finance�the�rising�CAD.

There� has� been� a� flight� of� dollars� from� Indian� � Shores� on� account� of� � outward�remittances.� Under� the� Liberalized� Remittance� Scheme.(LRS)� Indians� are� allowed� � to�transfer�money�to��other�countries�for�current�consumption�such�as�Travel,�Education,�Medical� � treatment,� Purchase� of� foreign� property� and� financial� instruments.� The�amount� of� outward� remittances� under� the� Liberalized� Remittance� Scheme� for� the�month�of�August�2018�was�$�1.4�billion.�In�August�2018�alone�only�it�increased�by�30%.�The�increase�has�been�highest�for�foreign�travel�as�Indians�have�spent�nearly�24%�more�in�the�period�April-August�2018($2.02�Billion�than�in�2017�$�1.63�Billion)

3

4

5

6

7

8

The� US� President� Trump� is� adopting�“AMERICA� FIRST�“policies� that� have� wreaked�havoc�in�global�economy.�Its�Impact�has�not�spared�India�either�from�Tariffs�to��HIB��Visas�nothing� seems� working� in� India's� favor.� Further� sanctions� to� Iran� the� kicked� from�November��2018.The�imposition�of�sanctions�will�force�countries�importing�from�Iran�to�shift�towards�other�oil�producing�countries�and�create�a�short�fall� in�supply�firming�up�Prices.�Iran�is�the�third�largest�source�of�Oil�Imports�for�India��and�rising�prices�coupled�with�sanctions�does�not�augur�well�for�India's�CAD

Rising� imports�and�falling�exports:-� In�2016-17�exports�were�$275.8�Billion�and� Imports�were�$384.4�Billion�causing�a�deficit� �of�$108.6�Billion.� In�2017-18�exports�were�$�302.8�Billion;�Imports�were�$�459.7�resulting�in�Trade�deficit�of�$�156.9�Billion.�2018.�IMF��AnnualStaff�consultation�Mission�Report�has�estimated�the�trade� �deficit�for�2018-19�would�be�CIDSC�to�$�200�Billion�with�imports�and�$�546.6�Billion�and�exports�worth�$�340.97�Billion�

The�final�aggravator�is�the�panic�buying�by�importers,�currency�speculators�and�firms�rushing�for�buying�in�both�spot�and�forward�markets�so�as�to�stock�and�sell�at�a�later�stage.However�oil�prices�have�fallen�to�$�50�a�barrel.�We�will�have�to�watch�whether�oil�prices�will�fall�further�and�stabilizes�in�this�range�.Also�large�scale�sale�of�Dollars�by�RBI�has�propped�up�for�the�time�being�one�cannot�be�certain�that�the�rupee�will�not�fall�further�

9

10

11

Domestic�Factors1.High�Demand�and�low�supply�of�Goods�and�Services,�inefficient�supply�chain�management.2.Effects�of�Demonetization�and�introduction�of�GST�resulted�in�decline�in�production�and����consumption�demand�in�important�sectors�of�the�economy.3.The�large�scale�unemployment�is�due�to�closure�and�semi�closure�and�the�losses�incurred�����by�MSMEs�which�contributes�to�69%�of�employment�in�India,�rightly�known�as�India's�����engine�of�growth.4.Atmosphere�of�political�uncertainty.�Loksabha��elections�around�the�corner�in�May�145.Interference�by�RBI�by�tweaking�its�Monetary�Policy.

MEASURES�TO�CHECK�THE�FALL�IN�RUPEE�VALUEIndia�cannot�allow�Rupee�to�slide�downwards�continuously���sooner��or�later�it�has�to�adopt�policies�which�would�lead�to�appreciation��of�Indian�currency�and�reduce�volatility.The�best�way�to�correct�the�CAD�is�a)�Promotion�of�exports.�Time�is�opportune�for�India�to�boost�its�exports�by��galvanizing������MSME�sb)�Creating�a�brand�name�forIndia's��exports.�China's�growth�is�export�led.�By�boosting�������quality�of�our�exports�we�can�reduce�CAD.

c)�Modernize�Special�Economic�Zone(SEZ's)�and�Export�Oriented�Units(EOUs)�by�adopting�������state�of�the�art�technology��and�by�improving�infrastructure.d)�Trade�Agreements�with�Iran,�Saudi�Arabia�and�other�Gulf�Countries�to�make�payments�in������Indian�Rupee.e)�Explore�new�markets�apart�from�US�and�EU�in�Africa,�Latin�America�and�Common�wealth������of�Independent�states(CIS)�such�as�Uzbekistan,�Turkmenistan�,Azerbijan�and�others�.f)�Promoting�inflow�of�stable�foreign�funds�rather�than�volatile�investment�looking�to�make�����quick�buck.g)�Change�our�outlook�and�strategy�towards�other�sources�of�energy�and�capital.

Conclusion�

�����Many�economists�are�in�favor�of�letting�the�Rupee��fall�as�quickly�as�possible�and�to�find�new�equilibrium�level.�If�delayed�speculators�would�take�advantage�by�buying�dollars�from�the�market�now�and�selling�later�at�higher�rates�at�the�expense�of�the�RBI.�Even�China�with�more�than�$�3�Trillion�in�reserves,�allowed�the�Yuwan�to�fall�in�the�face�of�capital�flight.

�����Our�war�chest�of�$�380�Billion�forex�reserves�should�be�scrupulously�preserved,�specially�as�a�large�part�of�our�reserves�are�borrowed�reserves�rather�than��earned�through�current�account�surplus�as�in�China.

������In�addition�to�maintaining�macroeconomic�stability�by�sticking�to�fiscal�deficit��target�is�a�must.�The�recently�announced�measures�to�stem�the�fall� in� � � like�easing�terms�of�external�borrowings�and�Tax�concessions�on��dominated�bonds�may�induce�short�term�capital�inflowCutting�Non-essential�imports�will�help�in�our�balance�of�payments�position..

Finally�a�combination�of�all�the�measures�adopted�simultaneously�would�yield�the�desired�result

Thank��You�

EXCHANGERATEDEPRECIATIONANDEXPORTCOMPETITIVENESS*

aDr. Xavier V KProfessor�and�Head,�Department�of�Economics,�

aJain�University,�Palace�Road,�Bangalore�–�560001 .

ABSTRACT������Exchange-rate�pass-through�(ERPT)�measures�how�responsive�international�prices�are�to�changes�in�exchange�rates.�It�is�the�elasticity�of�local�import�prices�with�respect�to�the�local�currency�depreciation�(rise�in�the�price�of�foreign�currency).�It�is�measured�as�the�percentage�change� in� the� import� prices� resulting� from� one� percent� change� in� the� exchange� rate�between� exporting� and� importing� countries.The� economic� theory� of� exchange� rate� pass�through�explains�that�10�percent�depreciation�in�exchange�rate�after�netting�out� inflation�has� 1.5� percent� potential� positive� impact� on� exports.� The� argument� is� that� cheaper�currencies�make�exports�more�attractive.This�paper�attempts�for�a�sample�check�for�monthly�exports�trends�for�the�last�5�years�for�India�in�episodes�of�rupee�taking�a�toss�against�dollar�finds�no�discernible�buoyancy�in�exports�data.The�research�attempts�the� find�the�possible�reasons�why�exchange�rate�depreciation�does�not�lead�to�export�competitiveness�in�India.

Keywords:Exchange-rate�pass-through;�Exchange�rate�depreciation;�Export�competitivenessForex�reserve;�Import�cover;�External�debt�stock.

Email� Address:� ;� ;� Tel:� [email protected] [email protected]*�This�paper�was�presented�as�the�keynote�address�for�the�One-Day�State�level�Seminar,�Falling�Rupee�Value�and�its�Impact�on�Indian�Economy�on�12�January,�2019�held�in�BET�Sadathunnisa�College,�Bangalore.�

1.�INTRODUCTION

�������India's�external�sector�has�been�deteriorating�fast.�Trade�deficit�in�FY�2018�hit�5-year�high�of�$18� billion.� The� exports� are� not� really� picking� up.� The� non-oil� exports� moderated� to� 11.9�percent� y-o-y� from�13.4�percent� in� June�2018.� The� imports�have� jumped�29�percent� led�by�pre-festive� season�purchase�of�gold� and�electronics.� The�monthly�oil� deficit� is� at� 2013� level�

due�to�rising�international�crude�prices.�Indian�rupee�has�lost�over�9�percent�against�the�US�dollar�since�January�2018.�Indian�rupee�declined�to�74.39�on�10�October�2018�against�the�US�dollar�slipping�from�63.67�in�11�January�2019.�

�����The�economic�theory�of�exchange�rate�pass�through�explains�that�10�percent�depreciation�in� exchange� rate� after� netting� out� inflation� has� 1.5� percent� potential� positive� impact� on�exports.� The� argument� is� that� cheaper� currencies�make� exports�more� attractive.A�sample�check�for�monthly�exports�trends�for�the�last�5�years�for�India�in�episodes�of�rupee�taking�a�toss� against� dollar� finds� no� discernible� buoyancy� in� exports� data.What� could� be� the�reasons?

2.�ANALYSIS�OF�DATA

�����First�of�all,�import-intensity�of�India's�exports�is�also�increasing.�Therefore,�import�tariffs�are�playing� a� major� role� in� boosting� export� growth� in� India� leading� to� import-led� export�growth� mechanism.� Secondly,� other� emerging� economies� are� also� experiencing� currency�depreciation.All� competing� currencies� have� fallen�much�more� than� rupee� has� fallen.� So� a�weaker� rupee� cannot�make� a� bigger� difference� to� exporter's� ability� to� price� their� product�competitively.Currency� depreciation� plays� a� smaller� role� in� boosting� exports.� It� is� other�factors�–� infrastructure,� very� high� relative� wages� and� rigid� labour� laws� that� have� bigger�obstacles�to�trade.Given�global�growth�would�be�slow,�so�would�be�the�global� trade.There�is�little�to�suggest�any�big�uptick,�but�easier�trade�finance�from�banks.

�����Third,�given�rate�of�interest�are�rising�in�the�US�and�risk�aversion�to�emerging�market�remains,� capital� flows� could� remain� modest.The� big� worry� is� how� the� CAD� would� be�funded�as�capital�flows�are�unlikely�due�to�rising�interest�rate�cycle�in�the�US.The�estimate�of�CAD�for�2018-19�could�be�around�2.7�percent�on�the�back�of�$20�billion�merchandise�deficit.BoP� reached� a� deficit� of� 10-15� billion� in� Q1� of� FY� 19.� The� basic� BoP�–� current�account� plus� net� FDI� also� is� estimated� to� be� negative.FDI�was� expected� to� grow� at� 10�percent�30.3�billion.In�2017-18�$22�billion�flew�into�the�bond�market.But�mid-August�FPI�pulled� out� $5.6� billion� from� bond� market.Inflation� forecast� is� above� the� target� of� 4.5�percent�suggested�interest�rate�could�be�raised�again.�

� � � � � Fourth,� rupee� depreciation� is� a� factor� of� dollar� strength� rather� than� rupee�weakness.Rupee�has�been�strengthening�in�real�terms�while�inflation�rate�was�modest�but�above�world�inflation�rate.�As�a�result,�rupee�weakening�has�been�built�over�due�to�

thinflation� differential� between� India� and� the� US.July� was� the� 9 � consecutive� month�inflation�was�higher�than�RBI's�medium�target�level�of�4�percent.The�volatility�in�forex�market� was� also� been� due� to� bond� prices� falling.Annual� consumer� inflation� in� India�declined�to�2.33�percent�in�November�of�2018�from�an�upwardly�revised�3.38�percent�in�

�����October�and�below�market�expectations�of�2.8�percent.�It�is�the�lowest�inflation�rate�since�June� of� 2017� as� food� prices� have� fallen� the� most� since� the� series� began� in� 2012.� The�Reserve�Bank�of� India�revised�down� its� inflation�forecasts� to�2.7�percent-3.2�percent� for�the�period�Oct�2018-March�2019,�amid�lower�food�and�fuel�prices.�Inflation�Rate�in�India�averaged�6.37�percent�from�2012�until�2018,�reaching�an�all-time�high�of�12.17�percent�in�November�of�2013�and�a�record�low�of�1.54�percent�in�June�of�2017.

�����The�silver�lining�for�India�is�that�it�holds�a�forex�reserve�of�$�402�billion.�RBI�holds�560.32�tonnes� of� gold� of� which� 268.01� tonnes� are� held� in� overseas� in� Bank� of� England� and�BIS.Gold�share�of� total� forex� reserve�stands�at�5�percent�at�March�2018.Foreign�currency�assets�stand�at�$399.44�billion.�$269.01�billion�was�deposited�with�other�central�banks�and�BIS;� $27.76� billion� was� held� with� commercial� banks.� This� can�meet� all� traditional� forex�reserves.�Foreign�Exchange�Reserves�in�India�increased�to�396080�USD�Million�in�January�4�from� 393400� USD� Million� in� the� previous� week.� Foreign� Exchange� Reserves� in� India�averaged� 219388.56� USD� Million� from� 1998� until� 2019,� reaching� an� all-time� high� of�426080�USD�Million�in�April�of�2018�and�a�record�low�of�29048�USD�Million�in�September�of�1998.

�����Import�cover;�short-term�external�debt�cover;�short�term�debt�plus�CAD�deficit�cover�are�major� indicators� of� the� strength� and� weaknesses� of� a� country's� external� sector.� India's�import�cover�fell�to�10.8�months�in�Dec�2017.�The�adequacy�of�forex�reserve�is�measured�by�import�cover.�Import�cover�is�a�measure�of�currency's�stability.�Typically�10�month's�import�cover� is� seen� as� stable� for� currency.The� ratio� of� short-term� debt� to� foreign� exchange�reserve�was�23.8�percent�at�end-�March�2017�which�remained�the�same�at�Dec.�2018.Ratio�of�volatile�capital�flow�to�foreign�exchange�rate�declined�from�88�percent�in�March�2017�to�86.9�percent�in�Dec.�2017.India's�forex�cover�to�total�external�debt�improves�to�79.7�percent�in�Dec.2017.

�����India's�external�debt�stock�stood�at�$513.4�billion�dollar�on�end�Dec.�2017�recording�an�increase�of�$41.6�billion�(8.8%)�over�the�level�of�end�March�2017.Rise�in�external�debt�was�primarily� due� increase� in� commercial� borrowing,� NRI� deposits� and� short-term� debt.�Maturity� pattern� of� India's� external� debt� indicate� dominance� of� long� term-debt� which�account�for�81�percent�and�remaining�19�percent�id�short-�term�debt�at�end�Dec�2017.Long-term�debt�was�$415.8�billion�and�increase�of�$32.1�billion�over�March�2017.Short�-term�debt�was�$97.6�billion�and�increase�of�10.8�percent�over�March�2017.The�share�of�sovereign�debt�and�non-government�debt�were�21.2�percent�and�78.8�percent�respectively.

�������Foreign�exchange�cover�to�external�debt�improved�to�79.7�percent�in�end�Dec�2017�as�compared�to�78.7�percent�in�March�2017.Debt�service�ratio�declined�to�7.5�percent�in�March�

2018�from�8.5�percent�in�March�2017.India's�external�debt�to�GDP�ratio�–�20.5�percent.�The�ratio�of�foreign�exchange�reserve�to�total�debt�–�80.2�percent�on�March�2018�and�ratio�of�short-term�debt� to�original�maturity� to� foreign�exchange�reserve�stood�at�23.8�percent�at�end�Dec�2017.�The�ratio�of�short-term�debt�on�residual�maturity�to�foreign�exchange�reserve�constituted�42.0�percent�at�end�March�2018.

3.�CONCLUSION�����Exchange-rate�pass-through�(ERPT)�measures�how�responsive�international�prices�are�to�changes�in�exchange�rates.It�is�the�elasticity�of�local�import�prices�with�respect�to�the�local�currency� depreciation� (rise� in� the� price� of� foreign� currency).� It� is� measured� as� the�percentage� change� in� the� import� prices� resulting� from� one� percent� change� in� the�exchange� rate� between� exporting� and� importing� countries.� A� change� in� import� prices�affects� local� retail� and� consumer� prices.� When� exchange� rate� pass� through� is� greater,�there� is�more� transmission�of� inflation�between�countries.Suppose� India� imports�mobile�phones�from�the�US.�Initially�the�mobile�costs�$1000�and�1$�=�50.�The�rupee�depreciates�(dollar�appreciates)� to�75.�Suppose� the�mobile�costs�$1250.There�has�been�50�percent�change�in�exchange�rate,� i.e.,�$�changes�from�50�to�75.There�is�25�percent�change�in�import�price�i.e.,�mobile�phone�price�changes�from�$1000�to�$1250.In�short,�for�every�one�percent� depreciation� (increase)� in� exchange� rate� there� is� corresponding� 0.5� percent�increase� in� import� price.� To� conclude,� a� change� in� import� prices� affects� � and�retailconsumer� prices.� When� exchange-rate� pass-through� is� greater,� there� is� more�transmission�of� �between�countries.�inflation

REFERENCES�

1.Goldberg,�P.K.;�Knetter,�M.M.�(1997).�"Goods�prices�and�exchange�rates:�What�have�we�����learned?".�Journal�of�Economic�Literature.�35�(3):�1243–1272.�2.Campa,�J.M.;�Goldberg,�L.S.�(2005).�"Exchange�Rate�Pass-Through�into�Import�Prices".�����Review�of�Economics�and�Statistics.�87�(4):�679–690.�3.Gopinath,�G.;�Rigobon,�R.�(2008).�"Sticky�Borders".�Quarterly�Journal�of�Economics.����123�(2):�531–575.�4.Berman,�N.;�Martin,�P.;�Mayer,�T.�(2012).�"How�do�Different�Exporters�React�to�Exchange�����Rate�Changes?".�Quarterly�Journal�of�Economics.�127(1):�437–492.�5.Cook,�J.A.�(2014).�"The�Effect�of�Firm-Level�Productivity�on�Exchange�Rate�Pass-Through".�����Economics�Letters.�122�(1):�27–30.�

“ASTUDYONFALLINGRUPEEVALUEITSIMPACTONINDUSTRYANDSERVICESECTORININDIA”

Afzalunissa Uzma Alfa & Roshni Tabassum

PG�DEPARTMENT�OF�COMMERECE�AND�MANAGEMENT

MOUNT�CARMEL�COLLEGE,�[email protected]

ABSTRACT�����This�paper�explores�falling�value�and�its�impact�on�the�industry�and�service�sector,�a�falling�rupee�v/s�the�dollar�increases�the�cost�of�import�and��increases�export��revenue��in�re�terms�therefore� the� industry� should� focus� on� increasing� our� exports� which� will� lead� to�strengthening�of�dollar�value�over�rupee.�So�the�US�has�faced�inflation�@about�2%�per�year�and��in�contrast,�India�would�face�inflation�at�about�10%�per�year�in�simple�words�each�year�the�dollar� losses�about�2%�of� its�value�due� to� increasing�prices,� � and� the� rupee�decreases�around� 10%� of� its� value� due� to� increasing� prices.� So� what� comprises� of� industrial� and�service� sector?� Industry� is� the� manufacturing� of� products� or� related� services� within� an�economy,�the�services�sector�or� territory�sector� is� the�third�among�the�three�sector�theory�where� in� the� others� are� the� secondary� sector� and� the� primary� sector,� the� service� sector�deals� with� production� of� intangible� goods� instead� of� end� products.� In� the� recent� times,�with� the� rupee� weakening� at� Rs.70� to� a� dollar� has� an� impact� of� the� devaluation� on� the�economic� indicators� (such� as� GDP,� inflation,� employment,� investment,� imports,� exports,�core�industries�growth,�etc,.)��are�escalating.

Key�words�:�falling�value�rupee,�impact,�industries,�service�sector.

� � � � �This�study�revolves�around�past�one�year's�data.�As�we�can�see�that�at�present� India's�currency� value� is� falling� continuously� the� value� is� declined� 12%� in� January-� September�2018�here�the�Indian�currency�has�depreciated�the�most�in�this�period�where�external�value�of�homes�country�currency�depreciates�but�internal�value��is��same�this�kind�of�situation�is�called�as�devaluation�of�the�domestic�currency.

INTRODUCTION

REASON�FOR�CURRENCY�FLUCTUATION�����In�today's�everchanging�world�there�are�lot�of�changes�happening�as�some�currencies�are�going� really� high� where� as� some� are� going� into� deep� sinking� and� exchange� rates� keep�fluctuating�but�what�can�be�the�exact� reason�for� fluctuation� in�the�currency�or� � in�simple�words�rise�or�fall�of�currency?To�make�it�more�simpler,�we�can�say�that�currency�fluctuates�because�of�demand�and�supply,�like��most�of�the�currency�of�world��are�bought�and�sold�in�flexible�rates�based�on�the�demand�of�foreign�exchange�market�of�supply�and�demand,�so�when�there�is�a�high�demand�of�currencies�or�if�there�is�a�shortage�in�the�supply�it�will�lead�to�increase�in�price,�so�any�countries�currency�demand�or�supply�are�tied�with�lot�of�internal�factors� which� involves� like� country� monetary� policy,� inflation� rate� and� economic� and�political�conditions���

MONETARY�POLICY�����So�here�one�way�to�sustain�its�economy�is�through�the�monetary�policy.�Like�many�central�banks� of� the� country�make� an� attempt� to� control� the�demand� for� the� currency� either� by�increasing�or�decreasing�the�money�supply�or�the�interest�rates,�so�here�currency�circulation�of�the�amount�is�called�money�supply.�Therefore�so�when�the�country's�currency�becomes�more�available�and�when�the�supply�increases�the�currency�price�of�borrowing�will�decrease�and� here� the� price� at� which� money� can� be� borrowed� is� the� interest� rate� if� there� is� low�interest�rate�then�people�tend�to�borrow�more��currency�which�helps�the�economy�to�grow.�However,�if�there�is�lot�of�money�present�in�the�economy�and�demand�and�supply�doesn't�grow�then�prices�may�begin�to�inflate.

RATE�OF�INFLATION

�����The�major�factor�which�influences�the�fluctuationof��currency�in�the�country�is�the�inflation�rate.�So�in�general�the�rate�at�which��the�price�of�goods�and�services�which�are�increasing�in�is�the�rate�of�inflation.�If�there�is�a�lot�of��increase�in�the�inflation�rate�there�can�be�economic�

instability� which� leads� to� currency� depreciation� where� as� a� little� increase� in� the� rate� of�inflation�leads�to�a�healthy�economy.�Therefore�if��there�is�an�increase�in�the�interest�rate�it�will�lead�to�the�appreciation�of��the�currency�in�the�similar�way�if�there�is�a�decrease�in�the�interest�rate�it�causes�the�depletion�of�currency�so�a�countries�interest�rate�and�inflation�rate�heavily�influences�the�country's��economy.

ECONOMIC�AND�POLITICAL�CONDITIONS� � � � �The�political�and�economic�conditions�of� the�country�will�affect� the� fluctuation� in� the�country's� currency�value.�While�an� investor� invest� in� the� country� they�do�have� their�own�predictions�about�the�country�where�they�will�invest�so�that�investors�can�enjoy�high�rate�of�interest.�The�more�the�rate�of�interest�the�more�demand�for�the�currency�which�will�extract�a� lot�of� foreign� investments.�So� this� is� the�major� reason�why�politically�and�economically�stable� currency� has� higher� demand� which� will� lead� to� higher� return� rates.Apart�from�the�above�the�other�factors�also�may�be�as�follows:

UNEMPLOYMENT�RATEHOUSING�STARTS�TRADE�BALANCEGROSS�DOMESTIC�PRODUCT

� � � � �Having�a�strong�and�healthy�political�condition�has�an� impact�on�currency�values� in�a�positive�manner.�If�there�is�an�issue�happening�with�regard�to�the�political�condition�of�the�country�globally�then�the�currency�is�less�attractive�to�the�world�which�leads�to�the�fall�of�the�demand�where�as�on�the�other�go�if�the�new�government�promises�an�economic�stability�or�future� growth� then� there� is� a� confidence� in� the�minds� of� people� and� hence� the� demand�increases�

OBJECTIVES�OF�THE�STUDY·��The�main�objective�is�to�study�the�impact�of�the�falling�rupee�value�on�performance��������industries�and�service�sectors�·��Another�important�objective�is�to�study�the�reason�behind�the�fluctuation�of�currency�

This�study�can�be�useful�for�the�government�to�know�the�reasons�behind�fluctuation�of�currency�its�interest�rate�and�inflation�and�also�the�positive�as�well�as�negative�impacts�of�falling�rupee�value�on�industries�and�service�sectors.

SCOPE�OF�THE�STUDY

LIMITATIONS�OF�THE�STUDY·�Study�is�based�on�the�secondary�data�·�This�is�a�descriptive�type�of�data�·�Study�is�limited�to�the�information�available

IMPACT�OF�FALLING�RUPEE�VALUE�ON�INDUSTRIES�AND�SERVICE�SECTORS�����In�the�past�one�year�India�has�experienced�fall�in�the�value�of��rupeeupto�12�per�cent�which�is� hurting�many� in� India.� The� Industries� facing� the� rupee's� roller-coaster� ride�over� the� last�few�months�has�added�another�layer�of�risk�factor�in�the�market�through�its�unpredictable�conditions.The� tertiary� sector�which� is� also� called�as� service� sector� is� the� third� among� the�three� sector� theory� wherein� the� others� are� primary� sector� and� secondary� sector.� The�service�sector�deals�with�production�of� intangible�goods� instead�of�end�products�whereas�industries� deal� with� manufacturing� of� products.� The� service� sector� includes� insurance,�banking,� tourism,� health� care,� hotels,� software� services,� educational� institution,�automotive� services,� legal� services,� manufacturing� industries� etc,.� The� service� industry�holds� the�highest� importance�among�all� sectors�almost� contributing�60%� to� the�economy�especially� our� software� exports� to� the� world� level.� In� the� recent� times,� with� the� rupee�weakening� at� Rs.70� to� a� dollar� has� an� impact� of� the� devaluation� on� the� economic�indicators� (such� as� GDP,� inflation,� employment,� investment,� imports,� exports,� core�industries�growth,�etc,.)��are�escalating.

The�impacts�have�been�positive�as�well�as�negative

POSITIVE�IMPACTSSome�of�the�positive�impacts�on�the�industries�and�service�sectors�are�as�follows:

·The�fall�in�rupee�value�has�led�to�increase�in�export�rate�and�is�expected�to�fetch��more�����foreign�money�which�makes�the��economy�more�stable.�Basically�the�depreciating�rupee�����affects�the�exports�and�imports,�since�the�exports�are�likely�to�rise�it�acts�a�cushion�in�the�����dangerous�economic�conditions.

·This�will� lead� to� creation� of�more� jobs� in� the� export� industry�which� results� in� less�����unemployment�rate�in�the�country�therefore�it�increases�the�per�capita�income�of�the�����individuals�which�may�also�contribute�to�the�increase�in�GDP�rate.

·The�fall�in�rupee�value�may�also�lead�to�cost�effective�traveling�for�the�foreigners�which������may�increase�the�interest�of�the�tourists�thereby�providing�a�boost�to�the�hospitality�and�����tourism�sector.�Therefore�falling�rupee�value�results�in�growth�of�inbound�tourism.

·This� may� also� lead� to� increase� in� foreign� direct� investments� in� the� country� by� the�����foreigners�as�the�value�for�the�rupee�falls�the�investment�becomes�cheap�as�the�result�the�����economy�may�experience�flow�of�income�by�the�foreign�investors.

·In�case�of�the�pharmaceutical�industries�the�export-driven�drug�makers�may�benefit�from�����the�fall�in�rupee�value.

·A�weaker�rupee�may�result�in�a�positive�impact�for�oil�and�gas�explorers�as�their�sales�are�����dollar�denominated.

NEGATIVE�IMPACTSSome�of�the�negative�impacts�on�the�industries�and�service�sectors�are�as�follows:

·Due�to�falling�rupee�value�the�imports�suffer�as�the�cost�of�imports�increases�the�imported�����goods�and�services�will�be�charged�high�in�order�to�compensate�the�dollar-rupee�exchange�����rate.

·Due�to�increase�in�the�prices�of�imported�products�the�economy�faces�high�inflation�rate������which�will�hinder�the�growth�of�the�country�which�in�turn�increases�the�difficulty�level�for������the�common�man�to�survive.

·The�falling�value�of�rupee�also�has�a�negative�impact�on�the�students�who�are�planning�to�����study�abroad�because�they�might�experience�expensive�education,�as�they�pay�their�fees�����in�dollars�and�the�value�of�dollar�is�very�high�in�comparison�to�rupee.

·There�is�a�negative�impact�on�the�outbound�tourism.�Therefore�traveling�abroad�����becomes�expensive.

·Falling�value�of�rupee�will�increase�the�prices�of�oil�and�petroleum�products�as�the�country�����imports�the�products�it�is�forced�to�pay�more�per�dollar�for�crude�oil,�hence�resulting�in�rise�����in�prices.

·In�case�of�multinational�drug�makers,�a�falling�rupee�value�is�a�negative�because�of�the�����expensive�imports�due�to�the�high�value�of�the�foreign�currency

CONCLUSION

�����The�fall�in�rupee�value�has�both�its�positive�and�negative�impacts�on�the�economy.�The��overall� impacts� of� depreciating� rupee� have� been� mentioned� above� .� The� RBI� and� the�Government�of� � india� should� take� short� term�measures� to� improve� the� situation�of� the�country.� � The� government� should� realize� that� appreciation� and� depreciation� are� the�phenomena� created� by� the� economic� indicators.� Hence� negative� impacts� on� the�industries� and� the� service� sectors� should� be� regulated� so� that� it� doesn't� affect� the�economic�conditions.�The�fall�in�value�of�rupee�can�be�regulated�by�creating�a�demand�for�rupee.�Initiatives�may�be�taken�by�the�RBI�and�the�GOI�by:

·�Issuing�NRI�bonds·�Attracting�foreign�direct�investments�and�foreign�portfolio�investments.·�By�relaxation�of�domestic�market�conditions�to�attract�the�foreign�investors.

REFERENCESwww.Wikipedia.comwww.quora.comhttps://m.economictimes.comhttps://www.thehindu.comhttps://www.bloombergquint.com

FALLINGRUPEEVALUEEFFECTONFINANCIALSERVICESOFCOMMERCIALBANKS

Thaseen SultanaAssistant�professorGFGC,FrazertownBengaluru-05�

[email protected]

ABSTRACT�����Indian�rupee�has�reached�to�a�level�never�witnessed�before�against�US�benchmark�dollar�index.��Since�the�start�of�2018,�Indian�rupee�has�been�among�worst�performing�currency�in�Emerging�Market�(EM).�The�rupee�has�now�depreciated�by�6.2%�since�June�2018�when�the�RBI� started�hiking� rates.�Now� it�needs� to�be�noted� that,� Indian� rupee� in� free� fall� is�not�a�good� sign� for� the� country� for� a� lot� of� reason.� The� depreciating� rupee� adds� inflationary�pressures�further,�because�imports�become�costlier�and�therefore�increasing�the�prices�of�key�commodities�such�as�oil,� imported�coal,�minerals,�and�metals.� Interestingly�these�are�not� the� only� factors� will� face� brunt� of� Indian� rupee� in� free� fall,� � will� also� be� impacted�especially� when� you� opt� for� home,� personal� and� vehicle� loans.� Recently,� a� Moody's�Investor� Service� report� mentioned� that� Indian� central� bank's� efforts� to� tighten� the�availability� of� rupees� in� the� market� and� halt� a� slide� in� the� currency� may� squeeze�profitability�at�the�nation's�lenders�as�it�raises�their�funding�costs.�

Key�words�:�liquidity,�profibility,�interest�rates

INTRODUCTION�����The�rupee�has�witnessed�a�significant�fall�in�its�value�over�the�last�few�months.�The�value�of�the�rupee�againt�the�dollar�fallen�by�more�than�5%�since�the�beginning�of�2018,�and�the�fall�has� gained� further� momentum� in� the� last� few� weeks.� The� currency� now� trades� and� its�lowest� in� more� than� a� year.� The� rupee� however� is� not� the� only� currency� to� face�depreciation.� Other� emerging� economies� like� Indonesia,� Argentina� ,� Mexico� and� turkey�have� seen� a� fall� in� their� currencies.� so� the� rupee's� fall� is� part� of� a� sell-off� across� emerging�markets.� The� depreciation� of� a� host� of� emerging� market� currencies� ,� not� just� the� rupee,�suggests�that�there�is�a�global�factor�at�play.�The�U.S.�federal�reserve�is�expected�to�tighten�its�monetary�policy�stance�further� in�the�coming�months�and�year�by�taking�steps�towards�

�slowing�down�the�growth�in�U.S.money�supply.�This�is�considered�the�most�likely�reason�for� the� sell� off.� A� .slowdown� in� U.S.money� supply� growth� affects� the� value� of� other�currencies� in� two�ways� for� one� interest� rates� in� the� U.S.will� begin� to� rise� as� the� Fed's�demand� for�various�assets�begins� to�drop.� the�yield�on�10�year�U.S.treasury�bonds�has�already� riden� to� 3%from� around� 2%last� year� amid� the� Fed's� increasingly� hawkish�monetary�stance.�This�causes�a�rush�among�investors�to�sell�their�assets�in�other�parts�of�the�world� and� invest� the�money� in� the�U.S.where� they� could� earn� higher� returns.� The�consequent� flow� of� capital� from� the� emerging� markets� to� the� U.S.increases� selling�pressure�on�emerging�market�currencies�and�buying�pressure�on�the�dollar.�Secondly�as�the�Fed'�begins�to�tighen�money�supply�the�availability�of�dollars�in�the�global�market�is�likely�to�turn�scarce�compared�to�the�currencies� .�both�these�factors�affect�the�prices�at�which�traders�who�try�to�speculate�on�future�retail�demand�are�willing�to�buy�the�dollar�using�other�currencies.

REVIEW�OF�LITRATURE�����India�presents�a�unique�case�for�studying�the�impact�of�exchange�rate�movements.�Prior�to�the�Balance�of�Payments�crisis� in�1991,� Indian�Rupee�was�pegged�to�a�basket�of�currencies�dominated�by�the�US�Dollar.�The�external�payment�crisis�of�1991�forced�the�Reserve�Bank�of�India� (RBI)� to� implement�a�set�of�market-oriented�financial�sector�reforms,�and�a�paradigm�shift�from�fixed�to�market-based�exchange�rate�regime�in�March�1993.�Institution�of�Current�Account� convertibility� in� August� 1994,� gradual� liberalization� of� the� Capital� Account� along�with�other� trade�and� financial� liberalization�measures�meant�a� rise� in� total� turnover� in� the�foreign�exchange�market�by�more� than�150%� (from�$73.2�bn� in�1996� to�$130�bn� in�2002-2003,�and�further�to�$1,100�bn�in�2011-2012).�A�direct�outcome�of�these�changes�has�been�a�rise�in�the�volatility�of�Indian�Rupee�

Against� this� backdrop,� RBI's� exchange� rate� management� policy� has� aimed� at� maintaining�

orderly�conditions�in�the�foreign�exchange�market�by�eliminating�lumpy�demand�and�supply�and�

preventing�speculative�attacks,�without�setting�a�specific�exchange�rate�target.�Towards�this�end,�

RBI�has�used�a�combination�of�tools�including�sales�and�purchase�of�currency�in�both�the�spot�

and� the� forward� segments� of� the� foreign� exchange�market,� adjustment�of� domestic� liquidity�

through� the� use� of� Bank� Rate,� Cash� Reserve� Ratio� (CRR),� Repo� rate� etc.,� and� monetary�

sterilization�through�specialized�instruments.�An�interesting�feature�of�RBI's�intervention�during�

this�period�has�been�asymmetry�during�episodes�of�appreciation�and�depreciation.�RBI�has�been�

intervening�actively�in�the�foreign�exchange�market�during�episodes�of�Rupee�appreciation�by�

purchasing�foreign�exchange,�while�following�a�hands-off�approach�during�episodes�of�Rupee�

depreciation�[(PDF)�Impact�of�Rupee-Dollar�Fluctuations�on�Indian�Economy.�

STATEMENT�OF�THE�PROBLEM� � � � � Liquidity� is� already� tight� in� the� system�and�any�efforts�by�RBI� to� strengthen� the� local�currency� will� suck� that� out� and� squeeze� banks� further,”� said� Karthik� Srinivasan,� group�head�of�financial�sector�ratings�at�ICRA,�the�local�unit�of�Moody's.�“A�profit�pinch�will�be�felt�and�lenders�with�a�higher�portion�of� funding�coming�from�bulk�deposits�and�debt�will�be�affected�the�most.”

�����Indian�lenders�can�hardly�afford�another�headwind�as�they�absorb�trading�losses�from�the�past�year's�drop� in� sovereign�bonds�and�continue� to�battle�one�of� the�world's�worst�bad-loan�ratios.�The�country's�largest�banks�including�State�Bank�of�India�and�ICICI�Bank�raised�lending� rates� earlier� this� month� given� a� combination� of� weak� deposit� growth� and� the�strongest�loan�demand�in�four�years.

OBJECTIVES

1.�To�understand�the�process�of�falling�rupee�value.�2.�To�analyze�the�effect�on��financial�services�of�commercial�bank�in�terms�of�profitability������and�liquidity.�

RESEARCH�METHODOLOGYThe�research�paper�is�based�on�the�secondary�data�from�RBI�annual�report�,journals,�websites,�internet,etc�.The�paper�is�conceptual.

FINDINGS�What�does�fall�in�rupee�value�mean�for�india?1.���The�fall�in�the�value�of�the�rupee�means�that�buyers�are�now�having�to�shell�out�rupee�to�purchse�dollars.�The�fall�in�the�nominal�value�of�a�currency��in�itself�does�not�suggest�that�its�holders� are� worse� off.� If� the� real� value� of� the� dollars� bought� with� the� currency�were� to�increase� sufficiently� their� effective�purchasing�power�would� still� be� intact.� In� the�present�case� however� the� depreciation�of� the� rupee� is� due� to� a� fundamental� change� in� investor�attitude�to�the�rupee�for�the�worse�.�so�it�reflects�a�fall�in�the�rupee's�real�purchasing�power.�Further�as� far� as� the�depreciation�of� the� rupee�or� other�emerging�market� currencies�was�previously�unexpected�it�could�affect�the�expected��returns�of�people�who�invested�across�borders.��A�stronger�dollar�will�work�to�the�favour�of�those�who�invested�in�the�U.S.adversely�affecting�the�returns�of�investors�who�were�bullish�on�emerging�markets.�

The� rupee� however� is� not� the� only� currency� to� face� depreciation.� Other� emerging�economies�like�Indonesia,�Argentina�,�Mexico�and�turkey�have�seen�a�fall�in�their�currencies.�So�the�rupee's�fall�is�part�of�a�sell-off�across�emerging�markets.�The�depreciation�of�a�host�of�emerging�market� currencies� ,�not� just� the� rupee,� suggests� that� there� is�a�global� factor�at�play.�The�U.S.�federal�reserve�is�expected�to�tighten�its�monetary�policy�stance�further�in�the�

coming�months�and�year�by�taking�steps�towards�slowing�down�the�growth�in�U.S.money�supply.�This�is�considered�the�most�likely�reason�for�the�sell�off.�A�.slowdown�in�U.S.money�supply�growth�affects�the�value�of�other�currencies�in�two�ways�for�one�interest�rates�in�the�U.S.will�begin�to�rise�as�the�Fed's�demand�for�various�assets�begins�to�drop.�the�yield�on�10�year�U.S.treasury�bonds�has�already� riden� to�3%from�around�2%last�year�amid� the�Fed's�increasingly� hawkish�monetary� stance.� This� causes� a� rush� among� investors� to� sell� their�assets�in�other�parts�of�the�world�and�invest�the�money�in�the�U.S.where�they�could�earn�higher� returns.� The� consequent� flow� of� capital� fron� the� emerging� markets� to� the�U.S.increases�selling�pressure�on�emerging�market�currencies�and�buying�pressure�on�the�dollar.�Secondly�as�the�Fed'�begins�to�tighen�money�supply�the�avalilability�of�dollars�in�the�global�market�is�likely�to�turn�scarce�compared�to�the�currencies�.�both�these�factors�affect�the�prices�at�which�traders�who�try�to�speculate�on�future�retail�demand�are�willing�to�buy�the�dollar�using�other�currencies.

2.��Bankers�estimate�that�a�slow�drain�of�rupee�could�result�in�the�banking�system�having�a�daily�deficit� of� about�one� trillion� rupees�which� is� about�1�per� cent�of�bank�deposits,� by�march�2019�from�daily�surplus�of�300-400�billion�rupees�in�june.

�����Indian�lenders�can�hardly�afford�another�headwind�as�they�absorb�trading�losses�from�the�past�year's�drop� in� sovereign�bonds�and�continue� to�battle�one�of� the�world's�worst�bad-loan�ratios.�The�country's�largest�banks�including�State�Bank�of�India�and�ICICI�Bank�raised�lending� rates� earlier� this� month� given� a� combination� of� weak� deposit� growth� and� the�strongest� loan� demand� in� four� years.� Liquidity� in� the� financial� system� is� currently� at� a�deficit� of� around� 215.7� billion� rupees� ($3.14� billion),� according� to� the� Bloomberg�Economics� India� Banking� Liquidity� Index,� having� moved� from� a� surplus� of� 5.5� trillion�rupees� in�March�2017.�Advance� tax�outflows� in� the� second�half�of� June� sparked� the� cash�crunch.

�����The�Indian�central�bank's�efforts�to�tighten�the�availability�of�rupees�in�the�market�and�halt�a�slide�in�the�currency�may�squeeze�profitability�at�the�nation's�lenders�as�it�raises�their�funding�costs,�according�to�the�local�unit�of�Moody's�Investors�Service.

�����In�ICRA's�view,�Banks�having�large�investments�in�corporate�bonds�will�see�a�further�erosion�in� profits� if� yields� surge� following�measures� by� the� RBI� to� curtail� currency� volatility.If� RBI�intervenes� by� shortening� the� availability� of� local� currency� this�will� worsen� the� liquidity� of�banking�system�which� is�already� in�cash� shortage.�According� to� the�Bloomberg�Economics�India� Banking� Liquidity� Index,� liquidity� in� the� financial� system� is� currently� at� a� deficit� of�around� 215.7� billion� rupees� ($3.14� billion),� having� moved� from� a� surplus� of� 5.5� trillion�rupees�in�March�2017.From�the�above,�this�would�mean�RBI�would�charge�a�higher�interest�rate�for�all�money�given�out�to�scheduled�commercial�banks�(SCB).If�a�bank�is�paying�higher�interest�rate�to�RBI,� this�will� leave�no�option�for�them�but�to�charge�customers�with�higher�

�����lending�interest�rate� �especially�when�it�comes�to�home�and�auto�loans.Hence,�borrowing�cost�on�home�loans,�auto�loans,�personal�loans�and�gold�loans�would�rise�further.�In�case�if�you�have�taken�loan�for�studies�in�overseas�countries,�than�it�is�bad�for�you�when�rupee�is�in�free�falls.

�����For�example,�if�you�have�taken�a�loan�of�$40,000,�and�you�paid�your�first�installment�of�$10,000�at�Rs�64�per�US�dollar,�then�your�total�cost�will�be�Rs�6.40�lakh.�However,�in�current�scenario�where�rupee�has�inched�near�$69,�then�your�second�or�third�installment�of�$10,000�would�cost�you�Rs�6.90�lakh.

�����Loans�are�the�major�income�for�banks,�and�higher�lending�rates�would�slow�down�business�of�banking�system�which�will�impact�their�earnings�in�book.On�September�01,�the�country's�largest� lender� State� Bank� of� India� has� already� increased� its� benchmark� lending� rates� or�MCLR� by� 0.2� per� cent,� effective� from� today.� Other� banks� are� expected� to� follow� the�move.SBI� has� increased� the� lending� rate� by� 20� basis� points� across� all� tenors� up� to� three�years.

�����When�banks�borrow�funds�from�the�central�bank�during�shortage,�they�will�now�pay�higher�interest�rate�which�is�6.50%�this�was�not�the�case�two�policy�ago�as�they�just�paid�6%�till�June�2018.�So�now�with�a�50�basis�points�hike�borrowing�from�RBI�becomes�costly�for�banks.

� � � � � Another� reason� to� hike� lending� rate� would� also� be� corporate� bonds.� When� rupee�depreciates�the�corporate�bonds�are�kept�at�higher�level�which�can�force�in�hike�of�interest�rate�which�would�tackle�the�fall�by�attracting�foreign�capital.�However,�such�would�affect�the�long�term�debt�funds�as�their�Net�Asset�Value�(NAV)�returns�could�drop�when�interest�rates�surge.�This�will�hurt�borrowers�as�the�cost�of�borrowing�gets�expensive.

����The�rupee,�Asia's�worst-performing�currency�this�year,�touched�a�record�low�on�with�rising�oil�prices�threatening�to�stoke�inflation�and�worsen�government�finances.�State-run�banks�probably�sold�dollars�on�behalf�of�the�Reserve�Bank�of�India�to�arrest�these�declines.�Creating�a�shortage�of�the�local�currency�risks�worsening�liquidity�in�India's�banking�system,�which�is�already�running�short�of�cash.

“Liquidity� is� already� tight� in� the� system� and� any� efforts� by� RBI� to� strengthen� the� local�currency�will�suck�that�out�and�squeeze�banks�further,”�said�Karthik�Srinivasan,�group�head�of�financial�sector�ratings�at�ICRA,�the�local�unit�of�Moody's.�“A�profit�pinch�will�be�felt�and�lenders�with�a�higher�portion�of�funding�coming�from�bulk�deposits�and�debt�will�be�affected�the�most.”

Banks�that�have�large�investments�in�corporate�bonds�will�see�a�further�erosion�in�profits�if�yields� surge� following� measures� by� the� RBI� to� curtail� currency� volatility,� according� to�ICRA.On�June�28,�2018,�the�Indian�rupee�plunged�to�an�all-time�low�of�69.10�against�the�US�dollar� amid�growing� concerns� over� tightening�of� global� financial� conditions� and�higher�

crude�oil�prices�coupled�with�the�worsening�of�domestic�macroeconomic�variables�especially�the�current�account�balance�and�inflation.

� � � � �The�mad�rush�for�dollar�by�importers�and�currency�speculators�was�halted�temporarily�after� the� central� bank,� Reserve� Bank� of� India,� aggressively� intervened� in� the� currency�markets�by�selling�dollars�in�both�spot�and�forward�markets�to�arrest�the�slide�in�the�rupee.�If� the�RBI�had�not� intervened� in� the�currency�markets�on� that�day,� the� rupee�might�have�breached� the�psychologically� crucial�mark�of� 70� to� a�dollar.The�RBI�has�not� yet�disclosed�how� much� foreign� exchange� reserves� were� spent� on� that� day,� but� market� observers�estimate�that�the�RBI�might�have�spent�close�to�$2�billion�in�the�forex�markets�to�stem�fall�in�rupee�value.After�a�gap�of�four�years,�the�RBI�increased�the�benchmark�repo�rate,�the�rate�

that�which�the�central�bank�lends�money�to�banks,�to�25�basis�points�on�6 �June,�citing�upside�pressure�on�inflation�due�to�rising�crude�oil�prices�which�hit�$80�a�barrel�in�mid-May�2018.�However,�this�move�has�not�stopped�the�rupee�from�falling.

1.�Indian�Rupee�:�Asia's�Worst�Performing�Currency

�����India�is�not�the�only�emerging�market�economy�(EME)�facing�excessive�currency�volatility.�Other�EMEs�are�also�facing�sharp�exchange�rate�depreciation�since�the�beginning�of�2018�(see�Table�1).

Table�1�:�Performance�of�key�EME�Currencies�versus�the�US�Dollar

Emerging�Market� CurrencyChange�YTD�(in�%)Argentine�peso 55.4Turkish�lira 21.1Brazilian�real 17.1South�African�rand 11.0Russian�rouble 9.6Indian�rupee 7.9Indonesian�rupiah 5.6Chinese�yuan 1.7Mexican�peso 1.3

Source�:�Money�control�Research.In�particular,� the�Argentine�peso�and�Turkish� lira�have�depreciated�drastically� since�April�2018.� However,� depreciation� of� the� Indian� rupee� is� higher� than� other� Asian� currencies�(such� as� the� Indonesian� rupiah� and� Philippine� peso)� that� have� also� witnessed� rapid�depreciation�simultaneously.�So�far,�the�Indian�rupee�is�the�worst-performing�currency�in�Asia� as� it� has� depreciated� nearly� 8� percent� since� the� beginning� of� 2018.� India� follows� a�managed� floating� exchange� rate� system� under� which� the� exchange� rate� is� largely�determined�by�market�forces.�The�RBI�maintains�that�it�does�not�target�a�pre-specified�level�

or�band�for�rupee�exchange�rate,�but�it�occasionally�intervenes�in�the�foreign�exchange�market�to�stem�the�excessive�volatility.

2.��Dwindling�Forex�Reserves

�������Due�to�capital�outflows�and�intervention�by�the�RBI�in�the�currency�markets,�India's�forex�reserves�have�fallen�in�recent�weeks.�As�per�the�latest� ,�forex�reserves�declined�RBI�statistics$6�bn�(from�$413�bn�to�$407�bn)�within�a�period�of�two�weeks�(June�8-22,�2018).

�����The�current�levels�of�India's�forex�reserves�can�cover�10�months�of�imports�but�what�should�be�worrisome�is�that�the�magnitude�of�volatile�capital�flows�(consisting�of�portfolio�inflows�and� short-term� debt)� to� forex� reserves.� The� volatile� capital� flows� constitute� close� to� 86�percent� of� forex� reserves.� Such� short-term� private� capital� flows� are� prone� to� sudden�reversals� while� their� positive� contribution� to� the� economic� development� in� the� host�country� is� very� limited.� More� importantly,� volatile� capital� flows� have� the� potential� to�perpetuate� a� currency� crisis� in� emerging�markets,� as�witnessed� during� the� Asian� financial�crisis�of�1997.India� is�currently�caught�in�a�classic� 'impossible�trinity'��the�policy�trilemma��which� implies� that�a� country�cannot�achieve� the� free�capital�mobility,�a� fixed�exchange�rate�and�an�independent�monetary�policy�simultaneously.

3.�'Taper�Tantrum:�Part�II'?

�����It�is�worth�recalling�here�that�similar�aggressive�intervention�by�the�RBI�in�the�currency�markets�was�seen�in�2013�when�the�rupee�went�into�a�tailspin�following�the�'taper�tantrum'�episode�–�a�mere�hint�by�the�then�US�Federal�Reserve�Chairman�Ben�Bernanke�that�the�Fed�may�phase�out�its�asset�purchase�program�(commonly�referred�to�as�Quantitative�Easing).�That�announcement�caused�panic�selling�in�bond�and�equity�markets�all�over�the�world.�In�particular,�EMEs�with�higher�current�account�deficits,�high�inflation,�and�low�forex�reserves�witnessed� sharp� market� volatility� followed� by� drastic� exchange� rate� depreciation� and�capital� reversals.� The� impact� was� felt� acutely� by� those� EMEs� which� received� substantial�capital�inflows�from�advanced�economies�during�the�QE�programs.

�����The�'taper�tantrum'�episode�also�had�an�adverse�impact�on�the�Indian�financial�markets,�which� experienced� large� swings� in� asset� prices.� The� foreign� institutional� investors� (FIIs)�pulled�out�money�from�the�Indian�debt�and�equity�markets�while�panic-stricken�importers�rushed�to�buy�dollars�to�honor�their�payment�commitments�to�overseas�sellers.�The�large�capital�outflows�and� increased�demand�for�dollars� resulted� in�sharp�rupee�depreciation.�The�rupee�depreciated�by�over�20�percent�during�the�tapering�episode.

In�2013,�five�EMEs��India,�Turkey,�South�Africa,�Indonesia,�and�Brazil��were�described�as�'fragile�five'�(a�term�coined�by�To�avert�a�potential�financial�crisis�in�2013,�the�RBI�deployed�a�wide� range� of� policy�measures� to� safeguard� financial� stability.� These� included�monetary�tightening� via� the� cash� reserve� ratio� (CRR)� and� the� liquidity� adjustment� facility� (LAF);�

imposing� restrictions�on� import�of�gold;� special�window�for� swapping� foreign�currency�deposits;� banning� banks� from� carrying� proprietary� trading� in� currency� derivatives;�tightening�the�position�limits�on�currency�futures;�prohibiting�arbitrage�trades�between�futures�and�OTC�markets;�and�imposing�new�restrictions�on�capital�outflows�by�resident�Indiana�research�analyst�at�Morgan�Stanley)�that�were�facing�similar�financial�risks�due�to�the�threat�from�the�reversal�of�QE�program.

4.��Spillovers�from�US�Monetary�Policy�'Normalization'

������India�needs�to�stay�extra�vigilant�as�new�financial�risks�emanate�from�the�'normalization'�of� monetary� policies� in� the� US� and� other� advanced� economies.� Since� India's� financial�markets�are�far�more� interconnected�globally� than�a�decade�ago,�tightening�of�monetary�policy� in� the� US� and� other� advanced� economies� could� prove� disruptive,� leading� to�“sudden� stop”� or� reversals� in� capital� inflows.The� spillover� effects� of� global� financial�market� volatility� to� India� (and� other� EMEs)� are� expected� to� be� severe� in� the� coming�months� as� the� US� Federal� Reserve� has� already� started� tightening� its� monetary� stance.�Between�March�and�June�2018,�the�

VII.�SUGGESTIONS�BY�ECONOMISTS.�����To�ease�funding�conditions,�economists�say�the�RBI�needs�to�either�cut�back�its�currency�intervention� or� conduct� heavier� open� market� operations,� such� as� bond� purchases� from�banks,�to�replenish�the�rupees.�But�such�bond-buying�operations�would�make�it�cheaper�for�the�government�to�borrow�more,�which�would�be�inflationary�and�at�odds�with�the�central�bank's�efforts�to�fight�price�pressures.�The�RBI's�biggest�challenges�will�be�if�tighter�funding�hurts�an�economy�that's�been�expanding�at�an�annualized�pace�above�7�per�cent,�one�of�Asia's�fastest.

����Analysts�think�it�ought�to�be�doing�more,�if�not�through�bond�purchases�then�by�unwinding�forward�holdings�in�dollar�swaps�to�release�funds.�“The�onus�on�RBI� is�really�in�some�form�of�quantitative�easing,”�said�Sanjay�Mathur,�Chief�Economist�for�South-east�Asia�&�India�at�ANZ�in�Singapore.

“I� expect� RBI� to� stick� to� its� Though� the� Finance� Minister� has� recently� stated� that� the�government� will� not� have� any�“knee-jerk� reaction”� to� stem� the� rupee� fall,� the� Indian�authorities� need� to� remain� cautious� as� any� big� event� in� large� economies� can� potentially�trigger�global�risk-off�sentiments.�In�such�circumstances,�the�Indian�financial�system�and�the�real�economy�cannot�remain�immune�to�global�meltdown.

�����Financial�market�volatility�is�here�to�stay�as�advanced�economies�are�unwinding�years�of�loose�monetary� policies.� The� growing� trade� tensions� between� the� US� and� China� could�severely� undermine� the� multilateral� trading� system.� These� global� developments� will�continue�to�exert�downward�pressure�on�the�rupee�in�the�coming�months.�It�is�therefore�

����imperative� for� Indian� policymakers� to� prepare� for� all� eventualities.� There� is� a� need� for�developing�an�appropriate�monitoring�system�to�detect�where�financial�vulnerabilities�are�building� up.� India� requires� a� robust� policy� framework� which� provides� sufficient� policy�space�when�responding�to�external�shocks.�The�regulatory�authorities�should�not�hesitate�to� use� capital� controls,�macro-prudential� and� other�measures� in� a� proactive�manner� to�safeguard�macroeconomic�stability.

�����From�a�development�perspective,�the�quality�of�capital�flows�is�important.�The�policy�emphasis� should�be�on�attracting� long-term�capital� inflows� that� improve�productive�capacity�rather�than�short-term,�volatile�flows�that�are�prone�to�abrupt�reversals.

References:-RBI�annual�report.�

www.indianmba.com/faculty_column

www.bbc.com/news/business

www.bloombegquint.com/markethttps://www.researchgate.n

et/publication/309488226_Impact�of_Rupee-

Dollar_Fluctuations_on_Indian_Economy�

https://economictimes.indiatimes.com��Markets��Forex

THEWEAKENINGRUPEEANDMUTUALFUNDRETURNS

Imtiaz Begum IAssistant�professor

GFGC�[email protected]

ABSTRACT

�����The�mutual�fund�industry�arrived�in�India�in�1963�with�the�inauguration�of�Unit�Trust�of�India�(UTI),�at�the�initiative�of�the�Government�of�India�and�the�Reserve�Bank�of�India�(RBI).�India's�mutual�funds'�assets�under�management�had�crossed�a�record�INR�20�lakh�crores.�But�in�the�last� few�months,�mutual� fund� investors�have�been�witnessing� the� consistency� in� the� losses�from� their�mutual� fund� investment.� Indian�markets� are� falling� due� to�weak� global� cues� or�due� to� macroeconomic� aspects.� But� many� investors� are� finding� difficulty� to� understand�what� is� the�exact� relation�between� Indian� rupee's� value�and� the�dollar�movement�and�also�how�these�aspects�affect�the�Indian�market�as�a�whole�and�mutual�fund�returns�in�particular.�So�let�us�explore�how�the�rupee�depreciation�can�impact�on�mutual�fund�returns.�

INTRODUCTION

��� �The�mutual�fund�industry�arrived�in�India�in�1963�with�the�inauguration�of�Unit�Trust�of�India,�at�the�initiative�of�the�Government�of�India�and�the�Reserve�Bank�of�India.�The�history�of�mutual�funds�in�India�can�be�viewed�in�four�distinct�phases,�namely,�the�first�phase�(1964-87),�the��second�phase�(1987-93)�,�the�third�phase�(1993-2003)�and�the�fourth�phase�(from�February�2003,�till�date).��

������Mutual�fund�is�a�mechanism�for�pooling�money�by�issuing�units�to�the�investors.�The�money�so� pooled� is� invested� in� securities� like� stocks� in� accordance� with� certain� objectives.� These�objectives�are�disclosed�by�the�mutual� fund�concerned� in�what� is�called�an�offer�document.�Investments� in� securities� are� spread� across� industries� and� sectors.� This� diversifies� away� the�risk�because�all�stocks�may�not�gain� in�the�same�proportion�all�the�time.�Mutual�funds� issue�units� to� the� investors� in� proportion� to� the� investment�made� by� them.� Investors� in�mutual�funds� are� called� unit-holders.� The� profits� generated� or� losses� incurred� are� shared� by� the�investors�in�proportion�to�their� investment.�Mutual�funds�normally�come�out�with�a�number�

������of�schemes.�They�are�launched�from�time�to�time�and�with�different�investment�objectives.�A�mutual�fund�is�required�to�be�registered�with�the�Securities�and�Exchange�Board�of�India�(SEBI)� before� it� can� collect� funds� from� the�public.� SEBI� formulates� policies,� regulates� and�supervises�mutual�funds�to�protect�the�interests�of�the�investors.�SEBI�notified�regulations�for�mutual� funds� in� 1993.� Thereafter,� mutual� funds� sponsored� by� private� sector� entities�were� allowed� to�enter� the� capital�market.� The� regulations�were� fully� revised� in�1996�and�have� been� amended� thereafter� from� time� to� time.� SEBI� has� also� been� issuing� guidelines�through�circulars�to�mutual�funds�from�time�to�time�to�protect�the�interests�of�investors.�All�mutual�funds,�whether�promoted�by�public�sector�or�private�sector�entities�(including�those�promoted� by� foreign� entities)� are� governed� by� the� same� set� of� regulations.� There� is� no�distinction� in� regulatory� requirements� across� mutual� funds� and� all� are� subject� to�monitoring�and�inspection�by�SEBI.

� � � � �A�mutual� fund� is�constituted�as�a�trust,�which�boasts�of�a�sponsor,� trustees,�an�Asset�Management�Company� (AMC)� and� a� custodian.� The� trust� is� established�by�one�or�more�sponsors�and�their�role�is�akin�to�the�role�of�promoters�in�a�company.�The�trustees�of�the�mutual�fund�hold� its�property�for�the�benefit�of�the�unit�holders.�The�AMC,�approved�by�SEBI,� manages� the� funds� by� making� investments� in� various� types� of� securities.� The�custodian,�who�is�required�to�be�registered�with�SEBI,�holds�the�securities�of�the�fund�in�its�custody.�The�trustees�are�vested�with�the�general�power�of�superintendence�and�direction�over�AMC.� They�monitor� the�performance� and� compliance�with� SEBI� regulations�by� the�mutual�fund.�SEBI�regulations�require�that�at�least�two-thirds�of�the�directors�of�a�trustee�company� or� board� of� trustees� be� independent.� In� other� words,� they� should� not� be�associated�with�the�sponsors.�Also,�at�least�50�percent�of�the�directors�of�the�AMC�must�be�independent.�All�mutual�funds�are�required�to�be�registered�with�SEBI�before�they�launch�any�scheme.

1.2�Review�of�Literature��� � �Ever�since�the�advent�of�the�ARCH�model�by�Engle�(1982),�research�on�the�transmission�mechanism�of� volatility�between� various� segments� of� the� financial�market� has� been� fast�advancing.� The� application� of� ARCH� and� its� generalized� form,� i.e.,� GARCH� has� advanced�rapidly� in� examining� volatility� transmission� among� stock� markets.� Studies� on� volatility�transmission�based�on�low-frequency�foreign�exchange�data�are,�however,�relatively�sparse.�The�initial�application�of�GARCH�model�to�the�foreign�exchange�market�could�be�traced�back�to�the�works�of�Diebold�and�Nerlove�(1989).�They�employed�a�vector�autoregressive�(VAR)�model� as� a� basis� for� the� variance� decomposition� of� forecast� error� variances� in� order� to�measure�the�magnitude�of�return�and�volatility�spillovers�in�the�foreign�exchange�market.�Bollerslev� (1990)� used� a�model�with� time-varying�conditional�variances�and� co-variances,�but� constant� conditional� correlations,� to�model� a� set� of� five� nominal� European-US�Dollar�

�����exchange� rates� in� the� period� before� and� after� the� inception� of� the� European� Monetary�System�(EMS).�Fluctuationing�Value�Of�Rupee�&�Impact�On�Economy�www.iosrjournals.org�26�|�Page�Engle,�et�al.�(1990)�examined�the�heat�waves�and�meteor�showers�hypothesis�with�the� help� of� GARCH� model� using� in� tardily� data.� Their� empirical� evidence� was� generally�against�the�heat�wave�hypothesis.�However,�in�terms�of�country-specific�news,�they�found�that�Tokyo�news�had�the�largest�impact�on�the�volatility�spillovers�of

1.3��Statement�of�the�problem����In�the�current�share�market�situation,�the�weakening�rupee�has�hit�the�benchmark�thereby�mutual� fund� returns.� There� is� upside� risk� to� inflation� forecast.� In� such� a� scenario,� rupee�depreciation�add�risk.�Fall�in�currency�has�also�its�impact�on�mutual�funds.�The�movement�of�USD/INR�always�impact�Indian�Markets.

1.4��Objectives�of�the�study

ØExamine� how� the� rupee� depreciation� affects� the� mutual� fund� investors.ØExamine�the�impact�of�rupee�depreciation�on�mutual�investments�in�stock�market.

1.5��Sources�of�data����Secondary�data�has�been�collected�from�industry�bodies�/�industry�associations�including�the�Association�of�Mutual�Funds�in�India,�RBI�and�SEBI.��In�addition,�secondary�data�has�been�downloaded�from�the�web�sites�of�the�RBI,�SEBI�and�the�financial�press.��

1.6�Findings

The��investment�in�mutual�funds�(MFs)�having�exposure�to�international�equities,�chances�are� that� a� portion� of� their� net� asset� values� (NAVs)� are� being� affected� by� the� currency�movement.

1.6.(1)The�currency�effect

�����While�taking�advantage�of�currency�movement�is�unlikely�to�be�the�main�reason�for�investing�in�an�equity�fund�that�has�exposure�to�international�stocks,�the�fact� is�any�substantial�currency�movement�will�affect�the�fund's�NAV.

�����This�happens�because�you�buy�fund�units�in�Indian�rupees,�but�the�international�stocks�that�form�part�of�the�fund�are�bought�in�the�local�currency�of�the�country.�When�you�invest,�your�rupee�is�first�converted�to�dollars�and�subsequently�to�the�requisite�currency�of�the�country�where�the�stock�or�fund�units�are�bought.�The�opposite�happens�if�you�redeem.

�����If�this�was�a�straightforward�rupee�to�dollar�or�vice-versa�conversion,�then�a�weakening�rupee� will� have� a� positive� impact� on� the� NAV.� However,� life� becomes� difficult� if� the�transaction�involves�a�third�currency;�the�rupee�must�depreciate�against�the�US�dollar�more�than�the�third�currency�has�depreciated�for�it�to�add�a�positive�edge�to�the�overall�returns.�If�

�����on�the�other�hand�the�third�currency�has�appreciated�and�the�rupee�has�declined�against�the�dollar� then� the�advantage�because�of� this� currency�movement�on� the�overall� fund�returns�will�be�even�greater.

������So�you�need�to�consider�the�equation�with�the�third�currency�to�assess�the�overall�impact�on� returns� along� with� the� sudden� sharp� decline� in� rupee� per� dollar� on� funds'� NAVs.�Regional/global� equity� funds� investing� directly� in� overseas� securities� will� be� affected� by�the� movement� of� individual� currencies,� trading� and� stock� prices,� rather� than� rupee's�behaviour�against�the�US�dollar�alone.

1.6.(2)Other�factors

There�are�other�factors�involved,�the�most�important�being�the�underlying�asset�class.�����Many�equity�funds�which�have�exposure�to�overseas�markets,�invest�in�commodity�stocks,�emerging�market�equities�and�stocks�related�to�gold.�The�underlying�stocks�have�their�own�dynamics� which� dictate� return.� For� example,� while� gold� mining� stocks� have� done� well,�emerging�market�equities,�particularly�Asian�equities,�have�done�poorly�and�this�is�reflected�in� the�overall� returns.�Gold� funds�on�the�other�hand�have�performed�well� so� the�currency�effect�may�not�be�that�much.

�����In�most�cases,�the�effect�on�returns�on�account�of�currency�movement�is�secondary,�with�the�asset�class�performance�being�the�primary�factor.�Moreover,�there�are�too�many�variables�to�consider�and�it's�unlikely�to�be�a�linear�correlation�with�fund�returns.

1.6�(3)�Rupee�depression�and�stock�market:-

������For�every�1�per�cent�fall�in�the�rupee's�value,�the�profit�after�tax�of�India's�leading�information�technology� companies� is� expected� to� improve�by�50� to� 110�basis�points.�One�basis�point� is�one�hundredth�of�a�percentage�point.

�����The�pharmaceutical�sector�stands�to�benefit�from�a�fall�in�the�rupee,�as�between�60�and�80�per�cent�of�its�revenues�come�from�exports.

�����However,�outsized�gains�for�the�pharma�sector�are�limited�by�three�factors�–�at�least�70�per�cent�of�raw�material�and�20�per�cent�of�labour�costs�are�linked�to�the�dollar;�competitive�pricing�among�second�tier�firms;�and�depreciation�in�other�currencies�against�the�dollar.

�� � � �The�metals�sector�will�also�see�an�upside�as�export�earnings�are�linked�to�global�prices.�However,�the�sector�has�at�least�Rs.�29,200�crore�in�foreign�currency�loan�exposure,�of�which�only�half�is�hedged.�The�other�half�is�exposed�to�currency�fluctuation.

�����Private�sector�oil�and�gas�companies�will�also�benefit,�as�their�profits�will�more�than�offset�the�losses� of� state-run� firms� who� are� forced� to� sell� products� below� recovery� cost� due� to�government� policy.� The� sector� has� a� total� of� Rs65600� crore� in� forex� loans,� but� reports� say�most�of�it�is�hedged.

�����Fast�moving�consumer�goods�companies�will�see�only�limited�upside.�Since�most�FMCG�firms�are�net�cash�companies,�there�is�no�exposure�to�balance�sheet�risk�on�account�of�the�rupee.

�����The�power�sector�has�significant�forex�loans,�estimated�at�about�Rs.�21,000�crore,�and�import�content,�particularly�coal,�which�could�put�pressure�on�the�balance�sheet.

�����Another�industry�that�has�a�large�import�content�is�the�auto�sector,�and�will�be�therefore�be�hit� by� a� depreciating� rupee,� particularly� at� a� time�when� demand� is� slowing.� Some� Indian�automakers,�such�as�Tata,�have�become� large�overseas�players�and�their�earnings�could�be�helped�by�the�rupee's�movement.

�����The�telecom�industry�will�see�a�net�negative�earnings�impact�because�of�large�foreign�currency�debt,�of�about�Rs.�45,000�billion,�most�of�which�is�reportedly�unhedged.

������Capital�goods,�which�form�the�bulk�of�India's�imports�after�oil,�will�take�a�hit�on�earnings.�Forex�risks�also�exist�in�the�form�of�forex�debt�of�about�Rs900�crore,�two-thirds�of�which�is�unhedged.�The�slide�in�the�rupee,�in�line�with�emerging�market�currencies,� is�increasingly�being� recognized� as� a� concern� for� the� Indian� economy.� This� follows� Fed's� signal� that� it�would� hike� interest� rates� thrice� in� 2018� as� the� US� economy� is� growing� amid� modest�inflation.

�����Apart�from�above�factors,�persistent�outflow�of�foreign�funds�from�the�Indian�stock�as�well�as�bond� markets� has� also� impacted� rupee� performance.� The� rupee� has� weakened� by� 6.44�percent�so�far�in�2018.�In�August�2013,�the�local�currency�had�touched�its�all-time�low�of�68.8�against� the� dollar� on� Fed's�“taper� tantrum”.� There� is� cautiousness� among� investors� that�rupee� depreciation,� if� the� trend� continues,� could� compel� the� RBI� to� increase� policy� rates�higher.

1.6.(4)�Suggestion.�����There�is�upside�risk�to�inflation�forecast.�In�such�a�scenario,�rupee�depreciation�along�with�elevated�crude�adds�risks�of�further�rates�hike�by�RBI.�Rising�bond�yields�is�already�hinting�possibility�of�a�further�rate�hike.�Investors�of�mutual�funds�having�exposure�to�foreign�stocks�gain� when� the� rupee� depreciates.� As� such,� international� funds� have� two� dimensions� of�returns�–�the�performance�of� the� foreign�stocks�and�currency�movement.� In� the� last� few�years,�investors�of�international�funds�have�benefitted�much�from�the�rupee's�depreciation.

�����Depreciation�by�itself�would�not�impact�your�long-term�portfolio�if�it�is�a�well-diversified�one.�Nevertheless,�individual�stocks�may�see�short-term�price�movements,�if�they�are�in�the�export�or�import�business,�or�are�financing�them

�����The�stock�market�is�prone�to�volatility�as�it�is�impacted�by�the�macro-micro�environment�in�which�a�stock�operates.�Rising�bond�yields�are�already�suggesting�that�the�Reserve�Bank�of�India�(RBI)�might�raise�rates�again�in�its�next�policy�meeting�by�another�25�bps.“In�this�case,�

optimal�diversification�and�adopting�a�portfolio�approach�can�help�an�investor�reduce�the�volatility�of�the�stock�market.

1.6.(5)�Conclusion

�����The�optimal�diversification�and�adopting�a��portfolio�approach�can�help�an�investor�reduce�the� volatility� of� the� stock� market.� Fall� in� currency� is� not� a� big� issue� as� far� as� equity� is�concerned.�It�is�the�combination�of�a�rise�and�fall�in�the�price.

References123HelpMe.com.�(2017,�January�13).�Home:�123HelpMe.com.�Retrieved�from�123HelpMe.com�Web�site:�http://www.123helpme.com/commodities-futures-and-inflation-view.asp?id=164264Agarwal,�S.�(2013,�January�31).�Livemint:�Industry.�Retrieved�February�1,�2014,�from�Livemint�Web�site:�http://www.livemint.com/Industry/LyNBizkuOMdmThw6iaoGbN/Five-trends-that-will-drive-FMCG-growth-in-2013.htmlAniruddha,�B.�(2017,�August�17).�Home:�Businessworld.�Retrieved�from�Businessworld�Web�site:�http://businessworld.in/article/How-To-Safeguard-Your-Mutual-Fund-Portfolio-From-2008-like-Scenarios/21-06-2016-99455/Azman,�U.,�Ridhima,�S.,�&�Jayesh,�K.�(2017,�September�13).�Home:�Bloombergquint.com.�RetrievedfromBloombergquint.comWebsite:�https://www.bloombergquint.com/business/2017/09/07/indian-mutual-funds-now-manage-record-rs-20-lakh-crore

DEVALUATIONOFRUPEEANDITSIMPACTONCONSUMERGOODS

TahseenAssistant Professor GOVT. R.C. College

Bangalore [email protected]

ABSTRACT�����This�paper�presents�the�effect�of�rupee�depreciation�on�common�man.�The�main�focus�of�the�research� was� on� change� in� pattern� of� spending� and� savings� of� people� who� are� getting�affected� by� rupee� depreciation.Fast-moving� consumer� goods� (FMCGs)are� products� that� sell�quickly�and�at�a�relatively�low�price.�Examples�include�non-durable�goods�such�as�soft�drinks,�toiletries,� and�grocery� items.� The� FMCG� sector� has�been�growing� at� a� fast� clip� although� its�pace�of�growth�has�not�been�consistent�across�the�country.� �After�all,�the�sector,�on�account�of�the�very�nature�of� its�activity,�requires�a�good�number�of�stakeholders�for� its�success�and�the�stakeholders�have�to�move�in�perfect�lockstep�with�each�other.� �Currency�depreciation�is�severely� affecting� the� economy� of� our� country� and� eventually� its� residents� are� getting�affected� due� to� drastic� change� in� their�monthly� budget.� For� stock�market� investors,� things�have� turned�worse.� The� fall� in� the�value�of� Indian� currency�has� severalconsequences�which�could�have�mixed�effects�on�Indian�economy�and�its�residents.

�����FMCG�marketers�could�follow�to�usher�in�positive�changes�in�consumer�behaviour�towards�purchase� of� FMCG� products.� � They� inferred� that� the� FMCG�marketers� should� exploit� the�digital� marketing� tools� to� the� hilt� for� influencing� consumer� behaviour.� � Drip� e-mail�marketing,� consumer-centric� content� and� social� media� would� supplement� their� efforts�ideally.� � The�marketer� should� create� a�website� for� consumers� to� share� information� about�their�FMCG�products�and�engage�them�through�helpful�forums.�The�marketer�could�use�the�website�to�place�its�ads,�too

The�study�showed�that�after�currency�depreciation�people�are�grappling�with�inflated�prices�of�the�commodities�which�they�use�in�their�day�to�day�life�and�the�change�in�their�spending�and�savings�trends,�a�falling�rupee�will�pinch�students�who�are�planning�to�go�abroad�or�are�presently� studying� outside� India.� This� paper� studies� the� real� implications� of� the�

depreciation�of� the� rupee�on� the� Indian�Nationals�and� the� steps� taken�by�government�to�stem�its�fall.�Index�Terms-�Effect�of�Rupee�Depreciation,�Steps�to�stem�fall�of�rupee,�Causes�of�rupee�depreciation.�

1.1�INTRODUCTION�����Devaluation�of�currency�refers�to�reduction�in�the�value�in�relation�to�another�currency.�Theoretically,�it�is�employed�as�a�measure�of�comparative�value�of�different�currencies.�As�world�economic�history�has�shown,�devaluation�of�currency� is�not�as�simplistic�and�uni-directional�but�has�a�cascading�effect�on�the�economy�as�globalisation�has�changed�the�business� environment� forever,� leading� to� an� exponential� increase� in� the� commercial�opportunities,� complexity� of� the� business� environment,� multiplying� the� risks� and�opportunities,�further�magnifying�the�impact�of�devaluation�on�any�economy.

� � � � �Fast-moving�consumer�goods� (FMCGs),�also�known�as�consumer-packaged�goods,�are�products�that�sell�quickly�and�at�relatively� low�cost.�Examples� include�non-durable�goods�such�as�soft�drinks,�toiletries,�and�grocery�items.��The�FMCG�industry�includes�food�and�non-food,�every�day,�consumer�products.�They�are�usually�purchased�as�an�outcome�of�small-scale� consumer� decision� so� they� are� heavily� supported� (advertising,� promotion)� by� the�manufacturers.� Typical� purchase� of� these� goods� occurs� at� grocery� stores,� supermarkets,�hypermarkets,�etc.�Manufacturers�always�explore�new�outlets�and�sales�locations�while�the�traditional�retailers�have�introduced�private�label�brands�to�capture�additional�profit.

�����Everyone�uses�fast�moving�consumer�products�every�day.�This�business�is�based�on�building�powerful� brands� and� achieving� a� high� level� of� distribution.� Global� power� brands� are� the�choice� of� multinational� companies.� Local� brands� can� complement� these� by� achieving�superior� distribution� thorough� a� powerful� supply� chain� and�making� sure� the� products� are�available�wherever�someone�might�want�or�need�it.

�����The�FMCG�supply�chain�is�the�inter-related�collection�of�processes�and�associated�resources.�It� includes� suppliers,� manufacturers,� logistics� service� providers,� warehouses,� distributors,�wholesalers�and�all�other�entities�that� lead�eventually�to�delivery�to�the�end-user.�Followed�in�the�market�through�sales�force�activity�it�can�help�gain�a�high�level�of�distribution.�Market�Research,� consumer� research,� segmentation� and� product� positioning� is� the� compulsory�homework�of�any�company�in�this�industry.�Advertising�and�promotions,�POS�activities�drive�brand�awareness�and�trial,�purchase�and�it�is�a�core�activity.�While�TV�advertising�is�common,�new�methods�are�also�used,�including�internet�advertisements.�High�budgets,�creativity�and�detailed� planning� are� needed.� Given� this� backdrop,� one� can� appreciate� the� role� of� brand�loyalty�in�respect�of�FMCG�items.

FMCG�(fast-moving�consumer�goods)�firms�are�no�strangers�to�inflation.�A�falling�rupee�and�the� increase� in� FMCG� prices� are� expected� to� lead� to� higher� costs,� usually� passed� on� to�consumers.�The�difference�this�time�is�that�they�will�be�doing�so�under�the�watchful�gaze�of�the�government's�anti-profiteering�regulator.

� � � � � �Online�marketplace�Amazon�will�double�the�discounts� it�offers�on�daily�consumption�products�during� its� Prime�Day� sale,� starting� July� 16.� It�will� thus�up� the� ante� in� a� fiercely�competitive�and�rapidly�growing�online�grocery�market�(Ratna,�News:The�Economic�Times,�2018).�The�marketplace�will�offer�best-ever�deals�across�FMCG�product�categories�like�food,�grocery,� staples,� beauty,� personal� care,� baby� care,� detergent� and� home� care� during� the�Prime�Day�campaign.�The�brands�will�back� the�campaign,�according� to�an�Amazon� India�executive.

����STATEMENT�OF�THE�PROBLEM�����The�Fast�moving�consumer��goods�is�being�viewed�as�the�worst�affected�by�devaluation�of�

rupee..� This� is� attributable� to� the� pre-existing� inflation,� significant� inter-industry�

competition� and� low� purchasing� power� of� the� consumers� whereby,� the� manufacturing�

companies�bear�the�maximum�burden�and�lose�out�on�profit�margins.

� � � � � Instances� of� falling� prices� of� imported� commodities� have� also� been�mitigated� as� the�depreciating�rupee�has�meant�that�the�importer�gets�no�respite�as�they�need�to�pay�more�to�purchase�the�same�quantity�of�raw�material.

� � � � �The�impact�of�devaluation�of�the�Indian�rupee�is�that�imports�have�become�expensive,�thereby�����amplifying�overheads�of�production�and�operation,�and�ultimately�profitability�of�industries.

������The�FMCG�sector�has�been�growing�at�a�fast�clip�although�the�pace�of�its�growth�has�not�been�consistent�across�the�country�for�a�variety�of�reasons.��After�all,�the�sector,�because�of�the�very�nature�of� its�activity,� requires�a�good�number�of�stakeholders� for� its�success�and�what�is�more,�the�stakeholders�associated�with�the�sector's�operations�must�move�in�perfect�lockstep� with� each� other� for� the� success� of� the� sector.� � Additionally,� the� consumer� /�customer�stakeholders�have�different�expectations�vis-à-vis� their� requirements�based�on�where�they�hail�from�–�rural�India�or�urban�India.

�����Hence�the�factors�that�influence�the�buy�decision�of�the�consumers�/�customers�need�to�be�identified� accurately.� To� address� this� risk� better,� the� FMCG� sector� must� understand� the�behaviour� and� mind-set� of� the� consumer� /� customer� /� prospect� in� the� first� place� and�formulate�the�appropriate�strategy,�marketing�,etc.�

Care�must�be�taken�to�ensure�that�the�strategy�is�in�consonance�with�the�social�and�cultural�factors� that� characterize� � the� Indian�FMCG�market.� .� The�products�must�be�as� safe� and�as�reliable�as� they�are� required�to�be� in� the�advanced�West.�They�must�cater� to� the�uniquely�diverse� requirements�of� the� Indian�consumer� /� customer� /�prospect� too�at� the� same� time,�which�their�counterparts�in�the�West�do�not�have�to,�fortunately.�This�thesis�seeks�to�help�the�FMCG� players� address� this� problem� effectively,� in� view� of� the� complex� nature� of� the�problem,�among�other�things.�

Review�of�literature

1.�According�to�the�Retailers�Association�of�India�(RAI),�no�immediate�impact�onconsumption,�

����either�negative�or�positive�is�likely�because�of�Budget�2018

����(Sharmila,�2018)There�is�no�real�additional�money�in�the�hands�of�the�middle�class,�a�prime�

���driver�of�consumption.�The�proposed�reduction�in�corporate�tax�to�25�percent�in�respect�of�

����MSME�(medium,�small�and�micro�enterprises)�companies�boasting�of�a�turnover�of�up�to�

����INR�250�crore�is�a�welcome�move�and�will�benefit�many�retailers

2.�FMCG�major�HUL�admits�that�rising�crude�prices�and�a�weak�rupee�will�impact�the�input�� � � �cost.�It�may�go�for�"judicious�pricing"�without�losing�its�competitiveness�(The�Economic�� � � �Times,�2018).� �Rising�crude�price�has�a�higher�impact�on�the�home�care�category�of�the�� � � �company,�which�consists�of�laundry�and�other�cleaning�products.�The�company�has�not�����seen�inflation�across�all�categories,�though.�But�with�crude�moving�up�and�the�INR�coming�����under�increasing�pressure,�the�company�fears�a�greater�impact�in�the�days�ahead.��

3.� Economic� Times;� http://articles.economictimes.indiatimes.com/2013-08-� 14/news/�����41409812_1_gold-imports-customs-duty-current-account-deficit�;�July�2013.�[2]�Indian�����Express;�http://www.indianexpress.com/news/rbi-moves-to-limitedcapital-controls-to-�����save-rupee/1155564/2�;�July�2013.�[3]

4.�Fitch�Ratings�Agency�research�report�at:�http://indiaratings.co.in/upload/research/specialReports/2012/7/3/fitch03Ru� pee.pdf� ;�accessed�September�2013.�[7]�Government�of�India�(2013),�Central�Statistics�Office�(CSO)�website�(http://mospi.nic.in/Mospi_New/site/home.aspx),�accessed�in�January�2013.�[8]�Reuters,�Available�at:�http://in.reuters.com/article/2013/08/08/indiaeconomy-rupee-rbi-forex-idINDEE97709I20130808�;�August�2013.�

5.�Scope�of�the�present�study����The�study�confines�itself�to�FMCG�consumers�and�marketers�.

1.6��Objectives�of�the�study�

1.�The�objective�of�the�study�is�to�know�the�decrease�in�the�value�of�rupee�and�its�effect�on�����consumer�goods.1.�The�objectives�of�the�study�are�to:�Identify�the�strategies�exploited�by�the�marketers�to������induce�positive�changes�in�customer�behaviour�towards�purchase�of�FMCG�products�2.�Identify�the�ways�and�means�of�influencing�FMCG�customer�behaviour�in�the�context�of�����devaluation�of�rupee�value�in��the�Indian�market.

1.7.��Hypothesis�proposed�to�be�tested

The�study�proposes�to�test�the�following�hypotheses:“Anticipated�revival�of�the�rural�economy�following�a�favourable�monsoon�forecast�points�to�a�bright�year�ahead�for�the�FMCG�sector”.

1.8.��Research�design1.8.1.��Research�methodologyThe�study�is�descriptive�in�nature�and�has�used�the�'fact-finding'�survey�method

1.8.2.�Sources�of�dataSecondary�data�has�been�collected�from�industry�bodies�/�industry�associations�including�Retailers�Association�of�India�(RAI),�CII�and�FICCI.�And�the�secondary�data�has�been�downloaded�from�the�web�sites�of�the�marketing�and�consumer�goods�and�economic�times��.

1.8.3.�Sampling�planFMCG�marketers:� Given� the� rather� limited� number� of� FMCG�marketers� operating� in� the�vicinity� where� the� researcher� lives� and� the� time� constraint,� purposive� or� judgement�sampling� under� the� non-probability� method� has� been� deployed.� Applying� a� minimum�exposure�of�five�years�to�the�FMCG�industry�as�the�criterion,�the�researcher�selected�20�such�marketers.�This�criterion,�according�to�the�researcher,� is�the�most�appropriate�one�for�the�present�study.�What�is�important�is�the�typicality�and�the�relevance�of�the�sampling�units�to�the�study�and�not� their�overall� representativeness� to� the�population.� �Thus� it�guarantees�inclusion�of�the�relevant�elements� in�the�sample.� �Probability�sampling�plans�cannot�give�such�a�guarantee.

Consumers:�Given�the�rather�limited�number�of�consultants�operating�in�the�vicinity�where�the�researcher�lives�and�the�time�constraint,�purposive�or�judgement�sampling�under�the�non-probability�method�has�been�deployed.�Applying�a�minimum�exposure�of�five�years�to�the� FMCG� industry� as� the� criterion,� the� researcher� selected� 20� such� consultants.� This�criterion,�according�to�the�researcher,� is� the�most�appropriate�one�for� the�present�study.�What�is�important�is�the�typicality�and�the�relevance�of�the�sampling�units�to�the�study�and�

not�their�overall�representativeness�to�the�population.��Thus�it�guarantees�inclusion�of�the�relevant�elements�in�the�sample.��Probability�sampling�plans�cannot�give�such�a�guarantee.

1.8.4�Data�collection�instrumentsInterview�schedules,�specially�designed�for�the�purpose,�were�administered�to�the�respondents�for�collection�of�primary�data.��

1.8.5�Data�processing�and�analysis�planNon-parametric�statistical�units�were�used�to�test�the�association�between�some�qualitative�characters�and�conclusions�were�drawn�on�the�basis�of�formation�of�H and�H .��o� 1

1.8.6�Limitations�of�the�study.Primary�data�has�sometimes�been�deduced�through�constant�topic-oriented�discussions�with�the�respondents.�It�is�possible�that�a�certain�degree�of�subjectivity,�even�if�negligible,�has�influenced�their�views.

1.8.7.�Summary�of�findingsIn�the�following�paragraphs,�a�summarised�version�of�the�findings�arrived�at�in�respect�of�the�three�categories�of�respondents�is�furnished.�

1.8.8� � However,� how� consumers� will� react� to� an� across-the-board� increase� in� prices� is�unclear.�The�opposition�could�very�well�play�it�up.�Given�high�valuations,�FMCG�firms�have�very�little�room�for�error.�Their�shares�have�been�falling�along�with�other�sectors,�due�to�selling� of� equities� in� emerging� markets.� Healthy� volume� and� price� growth� leading� to�earnings�growth�is�what�is�required�to�hold�up�FMCG�valuations.�Any�challenge�to�that�is�a�risk�for�investors.

GST-driven� de-stocking� giving� way� to� fresh� consumer� goods� inventories� is� a� factor� that�points�to�a�bright�year�ahead�for�the�FMCG�sector,�according�to�26�respondents.��Imminent�election�is�some�states�leading�to�presentation�of�populist�budgets�is�a�factor�that�points�to�a�bright�year�ahead�for�the�FMCG�sector,�according�to�25�respondents.��Anticipated�revival�of�the�rural�economy�following�a�favourable�monsoon�forecast�is�a�factor�that�points�to�a�bright�year�ahead�for�the�FMCG�sector,�according�to�22�respondents.��

FMCG�marketers,�with�the�help�of�digital�marketing�tools,�should�identify�the�advertisement�that� prompted� the� consumer� to� take� the� “buy”� decision� and� exploit� it,� suggest� 27�respondents�by�way�of�strategy.����FMCG�marketers�should�exploit�drip�email�campaigns�to�target�consumers�at�various�stages,�ultimately�leading�them�to�make�the�“buy”�decision,�suggest� 16� respondents� by� way� of� strategy.� FMCG� marketers� should� market� through�customer-centric�content�and�trigger�exchange�of�views�across�consumers,�influencing�their�

behaviour,�suggest�15�by�way�of�strategy.��FMCG�marketers�should�use�social�media�like�Facebook�to�influence�consumer�behaviour,�suggest�12,�by�way�of�strategy.��

1.8.9.�ConsultantsDespite�of�global�economic�slowdown,�it� is�expected�that�the�Indian�FMCG�industry�will�continue�to�witness�merger�and�acquisitions�(M&A),�as�well�as�private�equity�investment.�As�the�M&A�deals�provide�the�Indian�FMCG�players�the�platform�to�gain�market�share�and�footprint�in�other�fast�growing�countries/regions�through�acquisitions�and�also�access�to�an� established� and� well� invested� distribution� infrastructure� capable� of� leveraging�existing�products�that�will�be�adaptable�to�the�new�geography,�the�Indian�firms�are�keen�on� focusing� on� higher� growth�markets� such� as� South-East� Asia,� Africa,� Latin� America.�With�Godrej�and�Wipro�taking�the�lead,�the�domestic�companies�have�been�quite�active�in�M&A�activities�in�order�to�gain�significantly�from�an�inorganic�growth�route.

FMCG�marketers,�with�the�help�of�digital�marketing�tools,�should�identify�the�advertisement����prompted�the�consumer�to�take�the�“buy”�decision�and�exploit�it,�suggest��respondents�by�way�of�strategy.

ConclusionsIf�the�depreciation�in�rupee�continues,�it�will�further�increase�inflation,�because�of�this����extreme�fear�people�across�all�age�groups�have�started�saving�more�which�is�good�news�for�banks�as�banks�are�grappling�with�the�tight�liquidity�.

RUPEEDEPRECIATIONANDITSIMPACTONINDIANECONOMY

P Victoria EvangelineMasters�in�International�Business�(II�Year)�

Mount�carmel�College�Autonomous

[email protected]

AbstractThis� paper� explores� the� impact� of� Rupee-Dollar� fluctuation� on� Indian� economy.� The�circumstances�which�have�been�created�for�the�economy�due�to�the�depreciation�of�rupee�against�dollar�reveals�that�there�has�been�a�strong�and�significant�negative�impact�of�this�currency�volatility�on�many�sectors.�The�relationship�between�the�values�of�local�currencies�in�terms�of�foreign�currencies�and�export�competitiveness�of�any�country�is�very�complex.�This�relationship�will�become�more�complex�if�there�is�the�heavy�dependence�on�imported�resources�in�the�exported�products.�During�last�the�one�year�Indian�rupee�weakens�many�times�and�reached�to�a�level�of�68.510�for�a�dollar�in�February�2016.�Since�January�2015,�the�local� currency� lost�around�12�percent� to� the�US�currency.� Indian�economy�which�already�suffered� from� large� fiscal� and� current� account� deficit� adversely� affected� by� relatively�exchange�rate�pressure.�To�track� it�again�on�the�way�many�hard�decisions�were�taken�by�Indian�govt.� This� paper� presents� different� challenges� due� to� these� fluctuation� and� steps�triggered�by�the�central�bank�and�government�to�create�stability.

Keywords:�Impact�of�Rupee,�Dollar�Fluctuations,�Exchange�Rate.

1.�Introduction�����Currency�fluctuations�are�a�natural�outcome�of�the�floating�exchange�rate�system�that�is�the�norm�for�most�major�economies.�The�exchange�rate�between�two�currencies�is�that�rate�at�which�one�currency�will�be�exchanged�with�another�currency.�It�is�also�known�as�a�foreign-exchange�rate,� forex�rate.�Exchange�rate�of�one�currency�versus�the�other� is� influenced�by�numerous� fundamental� and� technical� factors� [1,� 12].� These� include� relative� supply� and�demand� of� the� two� currencies,� economic� performance,� outlook� for� inflation,� interest� rate�differentials,� capital� flows,� technical� support� and� resistance� levels,� and� so� on.� As� these�factors�are�generally�in�a�state�of�perpetual�flux,�currency�values�fluctuate�from�one�moment�to� the� next.� But� although� a� currency's� level� is� largely� supposed� to� be� determined� by� the�

underlying�economy,�the�tables�are�often�turned,�as�huge�movements�in�a�currency�can�dictate�the�economy's�fortunes�

2.�Objectives

� � � � � The�main� objective� of� this� study� is� to� understand� the� concept� of� Exchange� rate� and�currency� fluctuation� and� understand� the� causes� for� decline� of� the� rupee� against� dollar.�Study�the�real�implications�of�the�depreciation�of�the�rupee�on�the�Indian�economy�and�also�different�stringent�measures�by�Indian�government�to�make�rupee�stronger.

3.�Literature�Review

3.1.�Background�of�India's�exchange�rate�policies

�����India�presents�a�unique�case�for�studying�the�impact�of�exchange�rate�movements.�Prior�to�the�Balance�of�Payments�crisis� in�1991,� Indian�Rupee�was�pegged�to�a�basket�of�currencies�dominated�by�the�US�Dollar.�The�external�payment�crisis�of�1991�forced�the�Reserve�Bank�of�India�(RBI)� to� implement�a�set�of�market-oriented�financial�sector�reforms,�and�a�paradigm�shift�from�fixed�to�market-based�exchange�rate�regime�in�March�1993.�Institution�of�Current�Account� convertibility� in� August� 1994,� gradual� liberalization� of� the� Capital� Account� along�with�other� trade�and� financial� liberalization�measures�meant�a� rise� in� total� turnover� in� the�foreign�exchange�market�by�more� than�150%� (from�$73.2�bn� in�1996� to�$130�bn� in�2002-2003,�and�further�to�$1,100�bn�in�2011-2012).�A�direct�outcome�of�these�changes�has�been�a�rise�in�the�volatility�of�Indian�Rupee�

� � � � � � Against� this� backdrop,� RBI's� exchange� rate� management� policy� has� aimed� at�maintaining� orderly� conditions� in� the� foreign� exchange� market� by� eliminating� lumpy�demand� and� supply� and� preventing� speculative� attacks,� without� setting� a� specific�exchange�rate�target.�Towards�this�end,�RBI�has�used�a�combination�of�tools�including�sales�and� purchase� of� currency� in� both� the� spot� and� the� forward� segments� of� the� foreign�exchange�market,� adjustment� of� domestic� liquidity� through� the� use� of� Bank� Rate,� Cash�Reserve� Ratio� (CRR),� Repo� rate� etc.,� and� monetary� sterilization� through� specialized�instruments.� An� interesting� feature� of� RBI's� intervention� during� this� period� has� been�asymmetry� during� episodes� of� appreciation� and� depreciation.� RBI� has� been� intervening�actively� in� the� foreign� exchange� market� during� episodes� of� Rupee� appreciation� by�purchasing� foreign� exchange,� while� following� a� hands-off� approach� during� episodes� of�Rupee�depreciation�

4.�Currency�Impact�on�the�Economy

A�currency's�level�has�a�direct�impact�on�the�following�aspects�of�the�economy:Merchandise�trade:�This�refers�to�a�nation's�international�trade,�or�its�exports�and�imports.�In�general�terms,�a�weaker�currency�will�stimulate�exports�and�make�imports�more�expensive,�thereby�decreasing�a�nation's�trade�deficit�(or�increasing�surplus)�over�time.

Economic�growth:�The�basic�formula�for�an�economy's�GDP�is�C�+�I�+�G�+�(X�–�M)�where:

C�=�Consumption�or�consumer�spending,�the�biggest�component�of�an�economy

I�=�Capital�investment�by�businesses�and�households

G�=�Government�spending

(X�–�M)�=�Exports�minus�imports,�or�net�exports.

�����From�this�equation,�it�is�clear�that�the�higher�the�value�of�net�exports,�the�higher�a�nation's�GDP.�As�discussed�earlier,�net�exports�have�an� inverse�correlation�with�the�strength�of� the�domestic�currency.

� � � � � Capital� flows:� Foreign� capital� will� tend� to� flow� into� countries� that� have� strong�governments,� dynamic� economies� and� stable� currencies.� A� nation� needs� to� have� a�relatively�stable�currency�to�attract�investment�capital�from�foreign�investors.�Otherwise,�the�prospect�of� exchange� losses� inflicted�by� currency�depreciation�may�deter�overseas�investors.

Fig.�1�On�the�basis�of�RBI�exchange�rate�data.

� � � � �Capital�flows�can�be�classified�into�two�main�types�-� foreign�direct�investment�(FDI),�in�which�foreign�investors�take�stakes� in�existing�companies�or�build�new�facilities�overseas;�and�foreign�portfolio�investment,�where�foreign�investors�invest�in�overseas�securities.�FDI�is�a�critical�source�of�funding�for�growing�economies�such�as�China�and�India,�whose�growth�would�be�constrained�if�capital�was�unavailable.

Inflation� :�A�devalued� currency� can� result� in�“imported”� inflation� for� countries� that� are�substantial� importers.� A� sudden� decline� of� 20%� in� the� domestic� currency� may� result� in�imported�products�costing�25%�more�since�a�20%�decline�means�a�25%�increase�to�get�back�to�the�original�starting�point.

A�strong�domestic�currency�exerts�a�drag�on�the�economy,�achieving�the�same�end�result�as�tighter�monetary�policy�(i.e.�higher�interest�rates)�

Interest�rates:�As�mentioned�earlier,�the�exchange�rate�level�is�a�key�consideration�for�most�central�banks�when�setting�monetary�policy.

5.��Sinking�Rupee�as�a�big�danger�for�Economy

�����The�prevailing�situation�is�creating�internal�as�well�as�external�threats�for�the�economy.�India�may�face�worst�financial�crisis�if�it�fails�to�stop�the�slide�in�the�rupee�[1].�There�is�a�difficult�choice�for�central�bank�to�best�use�its�limited�reserve�and�maintain�the�reliability�among� foreign� investors.� The� table� is� showing� the� continuous� depreciation� of� Indian�rupee�with�US�dollar�(RBI�exchange�rate�data).

Table�1.�Exchange�Rate�INR/�USD

45.15 41.04 39.85 49.96 44.64 44.52 45.249 54.235 51.659 55.989 54.629

2006(April)��

2013(April)��

2007(April)��

2013(Aug.)

2008(April)��

2013(Dec.)�

2009(April)��

2014(April)��

2010(April)��

2014(Aug.)��

2011(April)��

2014(Dec.)��

2011(Aug.)��

2015(April)��

2011(Dec.)��

2015(Aug.)�

2012(April)��

2015(Dec.)��

2012(Aug.)��

2016(April)��

2012(Dec.)

54.626 61.819 62.102 60.262 61.058 62.652 62.402 65.22 67.043 66.666

� � � � � There�are�many� reasons�due� to�which� this�critical� situation�came� in� to�economy�and�grabbed�more�attention�of�RBI�and�Indian�govt.�towards�this�scenario.�Some�of�the�reasons�are� mentioned� below� [12].� A� number� of� factors� can� cause� currency� depreciation,� i.e.�economic,�political,�corruption�etc.,�but�some�factors�require�greater�attention�and�should�be�analyzed�objectively�than�the�others

5.1��Dollar�On�A�Strong�Position�in�global�Market�:��The�main�reason�behind�rupee�fall�is�the�immense�strength�of�the�Dollar�Index.�The�record�setting�performance�of�US�equities�and�the� improvement� in� the� labor� market� has� made� investors� more� optimistic� about� the�outlook�for�the�US�economy.

5.2��Recession�in�the�Euro�Zone:��The�rupee�is�also�feeling�the�pinch�of�the�recession�in�the�Euro�zone.�From�the�past�few�months�global�economy�is�suffered�from�Euro�crisis,�investors�are�focused�on�selling�Euros�and�buying�dollars.�Any�outward�flow�of�currency�or�a�decrease�in�investments�will�put�a�downward�pressure�on�the�rupee�exchange�rate.

5.3� �Pressure�of� increasing�Current�Account�Deficit:� � The� country�with�high�exports�will�be�happier�with�a�depreciating�currency�India,�on�the�other�hand,�does�not�enjoy�this�because�of�crude�oil�and�gold�consist�a�major�portion�of�its�import�basket.�Euro�zone,�one�of�India's�major�trading� partners� is� under� a� severe� economic� crisis.� This� has� significantly� impacted� Indian�exports�because�of�reduced�demand.

5.4� � Speculations� from� Exporter� and� Importer� side.:� The� reason� of� fall� in� rupee� can� be�largely�attributed�to�speculations�prevailing�in�the�markets.�Due�to�a�sharp�increase�in�the�dollar� rates,� importers� suddenly� started� gasping� for� dollars� in� order� to� hedge� their�position,�which�led�to�a�further�demand�for�dollars.�On�the�other�hand�exporters�kept�on�holding� their� dollar� reserves,� speculating� that� the� rupee� will� fall� further� in� future.� This�interplay�between�the�two�forces�further�fuelled�the�demand�for�dollars�and�a�fall�in�rupee.

5.5��Unattractive�Indian�Market:��Foreign�Institutional�Investor's�(FII's)�are�a�good�source�of�dollars�inflow�into�the�Indian�market.�As�per�a�recent�report,�the�share�of�India's�FII�in�the�developing�markets�has�decreased�considerably�(till�2014).�Strict�political�policies�are�also�reasons�of�such�lack�of�appeal.

5.6��Interest�Rate�Difference:�Higher�real�interest�rates�generally�attract�foreign�investment�but�due�to�slowdown�in�growth�there�is� increasing�pressure�on�RBI�to�decrease�the�policy�rates.�Under�such�conditions�foreign�investors�tend�to�stay�away�from�investing.�This�further�affects�the�capital�account�flows�of�India�and�puts�a�depreciating�pressure�on�the�currency.

Fig�3.�India�Interest�Rate�Source:�Reserve�Bank�of�India.6.��Challenges�in�Front�of�Indian�Government6.1�Forex�Reserves:�RBI�can�sell�forex�reserves�and�buy�Indian�Rupees�leading�to�demand�for�rupee.� But� using� forex� reserves� poses� risk� also,� as� using� them� up� in� large� quantities� to�prevent�depreciation�may�result�in�a�deterioration�of�confidence�in�the�economy's�ability�to�meet�even�its�short�term�external�obligations.

6.2��Make�Investments�Attractive-�Easing�Capital�Controls:�RBI�can�take�steps�to�increase�the�supply�of� foreign�currency�by�expanding�market�participation� to� support�Rupee.�RBI� can�increase�the�FII�limit�on�investment�in�government�and�corporate�debt�instruments.�It�can�invite�long�term�FDI�debt�funds�in�infrastructure�sector.�The�ceiling�for�External�Commercial�Borrowings�can�be�enhanced�to�allow�more�ECB�borrowings.

6.3� Increasing� burden� of� servicing� and� repaying� of� foreign� debt:� A� major� drawback� of�depreciation� in� the� value� of� rupee� is� that� it� will� enhance� the� burden� of� servicing� and�repaying�of�foreign�debt�of�Indian�Government�(which�has�dollar�denominated�debt)�and�those�companies�that�has�raised�dollar�denominated�debt.�Most�of�the�foreign�loans�which�are�denominated�in�dollars,�will�create�a�burden�of�costly�short�term�debts�with�immediate�effect.

7.��Policy�implicationsFor� policymakers� trying� to� assess� the� impact� of� exchange� rate� movements� on� the� real�economy,�these�results�provide�various�important�insights.�Firstly,�the�short-run�impact�of�a�real�depreciation�on�firm's�output�growth�is�likely�to�be�negative�since�it�is�the�import�cost�channel� that� dominates� in� the� short� run.� Further,� the� impact� is� asymmetric,� with� real�depreciation�having�a�stronger�impact�as�compared�to�real�appreciation�

At�the�same�time,�maintaining�a�competitive�real�exchange�rate�is�imperative�for�boosting�intermediate�and�long-term�economic�growth�and�maintaining�the�external�balance.�Thus,�using� scarce� foreign� exchange� reserves� to� prevent� currency� depreciation� in� the� face� of�sustained�downward�pressure�on�the�currency�due�to�growing�fiscal�deficit�and/�or�massive�capital�outflows�would�be�problematic,�apart�from�being�unsustainable.

On� the� whole,� for� countries� relying� on� volatile� foreign� capital� inflows� to� finance� their�consumption�and�investment�needs,�a�careful�reserve�management�policy�along�with�a�sound�fiscal�policy�are�necessary� to�balance� the�multiple�objectives�of� stable�growth�and�external�sector�balance�in�the�long�run.

The�BJP-led�National�Democratic�Alliance�(NDA)�came�to�power�on�26th�May,�2014,�after�winning�the�16th�Lok�Sabha�elections.� In� its�manifesto,�one�issue�that�BJP�had�strongly�criticised�UPA�for,�was�the�free�fall�of�Rupee�i.e.�its�sharply�declining�value�against�the�US�Dollar.

When�NDA�came� to�power,� the�exchange� rate� stood�at�58.66.� In� simpler�words,�1�Dollar=�Rs.�58.66.�Over�the�years,�however,�the�Rupee�has�undergone�continuous�changes,�with�the�latest�one�being�the�all�time�low�value�of�Rs.�74.07�(as�on�5th�October,�2018).�Let's�take�a�look�at�the�Rupee�journey�under�the�Modi�regime:

(The�value�of�$1�in�Indian�Rupee)26�May�2014�‒�58.6626�May�2015�‒�63.9726�May�2016�‒�66.9326�May�2017�‒�64.5126�May�2018�‒�67.7215�Aug�2018�‒�70.3930�Aug�2018�‒�70.8206�Sep�2018�‒�71.9605�Oct�2018�‒�74.07

As�we�can�see,�there�has�been�a�clear�upward�trend�in�the�Dollar�value,�set�against�INR.�The�question� becomes� why.� Why� is� the� value� of� Indian� Rupee� continuously� depreciating,�reaching�its�lowest�ever?

What�is�currency�depreciation�and�how�does�it�work?Currency�depreciation�is�the�fall�in�the�value�of�a�currency�in�the�exchange�market.�So,�what�do�we�mean�when�we�say�the�value�of�Indian�Rupee�has�depreciated�against�US�dollars,�as�we�are�regularly�told�by�the�news�portals?�In�layman's�terms,�it�means�now�one�Dollar�can�be�exchanged�for�more�Rupees�than�before.

For� instance,�on�May�26th,�2014,�you�could�get�58.66�Rupees� in�exchange�for�one�Dollar.�However,�on�5th�October�2018�‒�four�years�later,�you�would�be�entitled�to�74.07�Rupees�in�exchange�for�one�Dollar.�That�is�the�depreciation�of�Rupee�and�a�simultaneous�appreciation�of�Dollar.

Rupee�at�an�all-time�low.�Here's�why.

1)��The�Lira�connection

Turkey,� the� middle-eastern� country,� is� going� through� a� financial� turmoil� right� now.� Its�relations�with�the�US�are�infringes,�leading�to�a�very�weak�currency.�Lira�‒�the�official�Turkish�currency�has�fallen�40�percent�against�the�US�Dollar�in�the�first�half�of�2018.�As�is�often�the�case,� the�turmoil's�of�a�financial�crisis� in�one�country�do�not�stay�confined�to�the�national�borders.� The� Lira� crisis� has� made� the� global� market� anxious� about� its� spillover� effects.�Developing�countries�tend�to�be�more�exposed�to�crisis� like�these,�making�the�situation�a�tricky�one�for�India.

2)�Dependency�on�oil�importIndia� is� the� third� largest� crude� oil� importing� country� in� the� world,� coming� only� after� US�and�China.� India� imports�more� than�80%�of� its� crude�oil� requirements,� thereby�making� it�more� vulnerable� to� changes� in� the� international� oil�market.� For� example,� if� the� crude� oil�prices�increase,�our�total�import�cost�will�also�increase,�affecting�our�current�account�balance�which�in�turn�affects�the�currency�market.

3)�Huge�current�account�deficitIn� June� 2018,� India's� current� account� deficit� rose� to� 42%,� approximately� $160� billion.�Current�account�deficit�is�the�difference�between�imports�and�exports�of�goods�and�service�of�a�country.�A�huge�dependency�on�crude�oil�imports�and�its�increasing�price,�as�mentioned�before,�affects�our�current�account�health,�making�the�deficit�larger.

How�does�a�current�account�deficit�impact�Indian�Rupee?In�simple�words,�an�increasing�current�account�deficit�(of�India)�leads�to�an�increase�in�the�demand�for�Dollar.�Why?�Because�we�need�more�Dollars�than�before�to�finance�our�growing�deficit,�also�paying� for� the� imports.�An� increase� in� the�demand�for�a�currency� leads� to� its�appreciation.� And� if� the� US� Dollar� is� appreciating� against� Indian� Rupee,� it� means� our�domestic�currency�is�depreciating.

4)�US�Fed�(Federal�Funds)�rate�changesSince� national� economies� share� an� intricate� bond,� the� effects� of� US� Fed� rate� hikes� are�felt�in�the�Indian�market�as�well.�A�hike�in�the�fed�rates�(as�was�observed�four�times�in�2018),�strengthens�the�US�Dollar,�which�in�turn�leads�to�a�depreciation�of�the�Indian�currency.

5)�The�global�marketThe� United� States� and� China� have� been� experiencing� a� trade� war� in� 2018.� As� both� are�among�the�world's�largest�economies,�the�trade�war�is�set�to�affect�the�global�economy.�While�the�ball�could�fall�on�either�side�of�the�court�for�India,�the�situation�has�definitely�created�a�growing�unease�among�global�investors�and�Indian�economists.

How�will�the�fall�in�Rupee�affect�Indian�economy?1.�Cost�of�oil� imports:�Crude�oil�can�be�called�a�major�engine�for�the�growth�and�working�of�the� Indian�economy�with� its�vast�utilities.�Since� India� imports�more�than�80%�of� its�oil�needs,�a�depreciation�of�Rupee�will�increase�the�cost�of�our�humongous�oil�imports.�This,�in�turn,�can�cause�our�current�account�deficit�to�worsen.

2.�An�increase�in�the�import�cost�will�directly�affect�the�Indian�corporate�market�for�the�worse.

3.�Inflation:�Domestic�currency�appreciation�and�inflation�work�in�the�opposite�directions.�So,�a�depreciation�of�the�domestic�currency�means�a�potential�increase�in�inflation.

4.� To� ward� off� an� increasing� inflation,� the� central� bank� of� a� country� generally� increases�the�interest�rates.�Consequently,�people�are�able�to�borrow�less�money,�and�hence,�they�also�have�less�to�spend,�keeping�the�inflation�in�check.�Reserve�Bank�of�India�(RBI)�might�resort�to�increased�interest�rates�too,�further�increasing�the�effect�on�corporates.

8.�ConclusionThe�fall�in�the�value�of�currency�affects�a�lot�of�economic�growth�indicators.�Depreciation�of�rupee�reduces�the�inflow�of�foreign�capital,�rise�in�the�external�debt�pressure,�and�also�grow�India's�oil�and�fertilizer�subsidy�bills.�The�most�positive�impact�of�depreciation�of�rupee�is�the�stimulation�of� exports�and�discouraging�imports�and� thus� improving�the�current�account�deficit.� But,� even� after� significant� increase� in� the� exports� and� sales� in� this� year,� Indian�companies�are� reporting�huge� foreign�exchange� losses�due� to� the�depreciation�of� Indian�rupee.� This� declines� the� overall� profitability� of� these� companies.� As� far� as� imports� are�concerned,�for�a�country�such�as�India,�imports�are�necessary.�Grim�global�economic�outlook�along� with� high� inflation,� widening� current� account� deficit� and� FII� outflows� have�contributed� to� this� fall.� RBI� has� responded� with� timely� interventions� by� selling� dollars�intermittently.�But� in�times�of�global�uncertainty,� investors�prefer�USD�as�a�safe�haven.�To�attract�investments,�RBI�can�ease�capital�controls�by�increasing�the�FII�limit�on�investment�in�

References

government� and� corporate� debt� instruments� and� introduce� higher� ceilings� in� ECB's.�Government� can� create� a� stable� political� and� economic� environment.� However,� a� lot�depends�on�the�Global�economic�outlook�and�the�future�of�Eurozone�which�will�determine�the�future�of�INR.

[1]Anshu�Grewal�(2013)�“Impact�of�Rupee-�Dollar�Fluctuations�on�Indian�Economy:�Challenges�for�Rbi�&�Indian�Government”,�International�Journal�of�Computer�Science�and�ManagementStudies�Vol.�13,�Issue�06,�August�2013�ISSN:�2231-5268.[2]Anubha�Dhasmana�(2014)�“How�exchange�rate�changes�impact�Indian�manufacturing�firms”.[3]Bagella,�M.,�L.�Becchetti,�and�I.�Hasan,�2006,�“Real�Effective�Exchange�Rate�Volatility�and�Growth:�A�Framework�to�Measure�Advantages�of�Flexibility�vs.�Costs�of�Volatility,”�Journal�ofBanking�and�Finance,�Vol.�30.[4]Chanan��Pal��Chawla��“Understanding��the��Impact��of��Exchange��Rate��Fluctuation��on��theCompetitiveness�of�Business”.[5]Coric,�B.,�Pugh,�G.�(2010).�“The�Effect�of�Exchange�Rate�Variability�on�International�Trade:�A�Meta-Regression�Analysis”,�Applied�Economics,�42(20),�pp.�2631-�2644.[6]C.�R.�L.�Narsimhan�(2003)�“Rising�Rupees�Hidden�Massage”,�The�Hindu,�April�3rd�2003.[7]Eichengreen,�B.�J.�(2008),�“The�Real�Exchange�Rate�and�Economic�Growth”,�InternationalBank�for�Reconstruction�and�Development,�The�World�Bank.[8]Investopedia�(2013)�“The�Effects�Of�Currency�Fluctuations�On�The�Economy”�http://www.investopedia.com/articles/forex/080613/effects-currency-fluctuations�economy.[9]Kenen,�P.,�Rodrik,�D.�(1986).�“Measuring�and�Analyzing�the�Effects�of�Short-Term�Volatility�in�Real�Exchange�Rates”,�Review�of�Economics�and�Statistics,�68(2),�pp.�311-315.[10]Melvin,�M.�and�B.�Peiers�Melvin,�2003,�“The�global�transmission�of�volatility�in�the�foreign�exchange�market”,�The�Review�of�Economics�and�Statistics,�85�(3),�670-67[11]Rabanal,�P.,�Tuesta,�V.�(2013).�“Nontradable�Goods�and�the�Real�Exchange�Rate”,�OpenEconomies�Review,�24(3),�pp.�495-535.[12]Sumanjeet�(2007),�“Appreciation�of�the�Indian�Currency:�Implications�for�the�Indian�Economy”,�World�Affairs:�The�Journal�of�International�Issues,�Vol�11,�No.�4,�Winter,�pp�52-69.[13]Zanna,�F.�Luis�(2005),�“Fighting�Against�Currency�Depreciation,�Macroeconomic�Instability�and�Sudden�Stops”,�International�Finance�Discussion�Paper,�No�848,�December,�Board�of�Governance�of�Federal�Reserve�System.

IMPACTOFFALLINGECONOMYONMEDICALANDEDUCATIONALTOURISM

Babli Kalita [email protected]��

Soundaryaa Chandrasekar [email protected]���

Harshini [email protected]

PG�Department�Of�Commrce�And�Management�mount�Carmel�Degree��College,�Autonomous

ABSTRACTAfter�the�independence�of�the�country,�we�were�at�par�with�the�value�of�dollar�but�now�we�are�in�a�risky�scenario�of�depreciation�rupee�value�due�to�internal�and�external�conditions.�India� is� witnessing� a� greater� problem� of� currency� devaluation� which� have� given� rise� to�uncertain�and�tensed�economy.�Situation�has�gone�worse�with�the�value�of�one�dollar�to�be�69.54�rupees.�The�value�of�rupee�continuously�is�slumping�down�which�is�making�outbound�travels� expensive.� � Indian� travellers� are� getting� calculative� with� their� travel� plans.� The�common�man�is�not�cutting�down�their�travelling�but�is�curtailing�on�the�duration�of�travel�and�other�extravaganza.�At�the�same�time�the�inbound�tourism�has�be�accelerated.��While,�on�the�other�side�of�the�fence,�it�is�bringing�in�foreign�travellers�more�frequently�as�dollar�has� improved� it� global� trading�markets� along� with� higher� currency� value.� India� with� its�landscape,� culture� and� hospitality� never� fails� to� attract� foreigners.� They� are� closely�developing� interest� for� medical� tourism� as� yoga� and� Ayurveda� have� spread� its� root�throughout�the�world.�India�provides�quality�education�maintain�the�standards�in�a�cheap�rate,�hence�attracting�foreign�student�in�the�country�boosting�cultural�exchange.�

INTRODUCTIONIn�this�study�the�focus�will�be�to�identity�how�is�tourism�sector�getting�affected�in�general�with�medical�and�educational�sector�in�particular�due�to�the�falling�price�in�Indian�economy.�India�is�a�booming�hub�for�travellers�flying�from�abroad�getting�mesmerised�by�the�culture,�heritage�and�values,hospitality�of�the�country�along�an�financial�advantage�over�the�Indian�rupee.�Apart�from�the�monuments�and�hassling�life�of�India,�foreign�travellers�are��seeking�

advantage� in� the�medical�and�educational�sector.�The�medical�care� in� India� is� significantly�promoted� by� the� Government� and� is� backed� by� the� corporates� with� is� increasing� more�foreign�'medical�tourist'�in�the�country.�They�are�looking�particularly�on�treatments�that�are�not�commonly�available� in� their�country� like�Ayurveda.�Also,� the�cost�of� treatment� for� the�same�ailment�overseas�in�twice�the�expensive�as�it�is�in�India.�A�consumeristic�civilisation�is�fostered��by�Globalisation�where�the�concept�of�fitness�and�spirituality�has�shifted�its�focus�to� Yoga.� It� was�made� the�world� look� towards� India� because� of� its� ancient� roots� in� yoga.�Similarly,�India�is�also�moulding�itself�into�an�educational�destination�specially�in�the�field�of�art,� history,� architecture� and� cultural� themes.� Ever� since� the�past,� the� country� has� been� a�hotspot� for� learning� in� the� South� Asian� region� where� people� had� travelled� to� Nalanda�University.�Though�at�present,�there�is�not�an�enormous�field�in�edu-tourism,�it�surely�has�the�potential�to�evolve�into�one�in�the�coming�years.

Theoretical�background�of�medical�and�educational�tourism:�Medical�tourism�is�a�developing�area�in�India.�In�October�2015,�India's�therapeutic�the�travel�industry�segment�was�assessed�to�be�worth�3�billions.�It�is�anticipated�to�develop�to�$7‒�8�billion�by�2020.�As� indicated�by� the�Confederation�of� Indian� Industries� (CII),� the�essential�reason�that�draws�in�medicinal�esteem�travel�to�India�is�cost-viability,�and�treatment�from�authorize�offices�at�standard�with�created�nations�at�much�lower�cost.�The�Medical�Tourism�Market� Report:� 2015� found� that� India�was� "one� of� the�most�minimal� expense� and�most�elevated� nature� of� all� restorative� the� travel� industry� goals,� it� offers� wide� assortment� of�methodology� at� around� one-tenth� the� expense� of� comparative� systems� in� the� United�States."�

United�States�and�United�Kingdom�has�been�the�major�sourve�of�medical�tourist��travelling�to�India.�Bangladesh�is�next�in�the�line�as�they�lack�better�medical�treatment�in�their�country�and�look�for�the�same�in�India.�In�2015,�India�turned�into�the�best�goal�for�Russians�looking�for� restorative� treatment.� Chennai,� Kolkata,� Mumbai,� Hyderabad,� Bangalore� and� the�National�Capital�Region�got�the�most�elevated�number�of�outside�patients�essentially�from�South�Eastern�nations.�what's�more,�as�India�has�most�English�talking�individuals�dialect�is�additionally�not�a�hindrance�for�the�explorers.

International�students�are�looking�towards�East�for�the�educational�opportunities�keeping�in�mind�the�quality�of�learning�offered�and�respectively�chose�their�education�destination�accordingly.�The�focus�on�the�rankings�of�the�institution�done�with�thorough�research�and�decide� whichever� is� best� for� them.� India� the� fee� of� education� or� the� tuition� cost� is�comparatively�less�yet�better�in�compare�to�most�countries.�Most�aspect�of�Indian�heritage�acts� as� a� source� of� learning� like� cultural� and� historical� themes� or� architectural� studies.�Students�and�faculty�exchange�programs�in�the�universities�expose�them�to�take�travels�to�

the�country�where�they�are�required�to�complete�a�part�of�their�course�in�their�homeland�and� other� part� in� India.� But,� the� Indian� students� are� loosing� admission� in� educational�institutions�and�on�the�other�side�NRI�and�other�foreign�students�get�to�pay�more�fees�for�their�education.

Statement�of�Problem�:�The�statement�of�problem�in�this�study�is�to�understand�the�impact�of�falling�economy�on�the�tourism�focusing�particularly�on�medical�and�educational�sector.

Need�and�significance�of�this�study:·�Analysis�of�the�standard�of�living�and�financial�status�of�other�country�people.·�Understanding�the�traveling�pattern�of�both�outbound�and�inbound�traveling.·�Determining�the�present�and�future�of�medical�and�educational�tourism.

Objectives�of�the�study:·�To�find�ways�to�expense�for�outbound�tourism.·�To�find�the�perceptionof��people�travelling�to�India.·�To�understand�the�potential�of�Indian�medical�and�education�standards.

Limitation�of�this�study:·�The�data�needs�to�be�updated�at�times�when�it�comes�to�further�usage�of�this�crucial���research�study�report.�·�The�falling�rupees�have�impact�in�inbound�and�outbound�tourism�in�different�ratios.·�This�report�is�done�according�to�the�current�fall�in�economy�thus�covering�the�current����perception�of�people�over�medical�and�educational�tourism.

Research� methodology� is� the� way� to� determine� a� perspective� and� find� answers� in�scientifically�proved�methods.�It��helps�to�look�into�a�problem�logically�and�systematically�approach�towards�a�situation�which�can�be�used�furtherly.

Research�methodology:

Research�design:The� research� design� used� in� this� research� report� is� exploratory� type.� The� exploratory�research�design� is�used�as� there�were� few� information�sources� regarding� to� the� research�report�and�the�purpose�is�that�is�to�find�possible�actions�or�outcomes.�It�serves�as�a�design�which� is� suitable� for� initial� research� and� it� doesn't� offer� concentrated� solution� over� a�research� and� offers� for� further� research� if� required.� This� exploratory� research� helps� in�preparing�secondary�report�from�various�primary�informational�resources.�And�exploratory�research�design�helps�and�intends�to�explore�the�research�and�does�not�intend�to�offer�final�conclusive�solutions�to�a�partial��or�a�particular�problem.�As�the�problem�is�not�clearly�one�particular�solution�or�a�perspective��for�the�particular�problem.�And�exploratory�research�is�flexible�to�the�changing�situations.�

Sampling�Techniques:The�sampling�techniques�give�accuracy�in�survey�or�research�results�and�by�which�samples�are�selected�according�to�the�research.�The�samples�are�selected�by�the�researcher�according�to�the�nature�of�the�research.

Findings�and�suggestion:The�impact�of�falling�economy�in�India�over�medical�tourism�is�that�we�provide�few�medical�aids� in� the� form� of� Ayurveda,� siddha� and� homeopathy� have� origins� here� and� as� people�want� to� have� treatments� which� lower� risk� and� does� costs� lesshave� improved� medical�tourism�in�India�where�the�falling�economy�has�been�a�bonus.�As�people�have�become�more�health�conscious.�On�the�other�hand�the�allopathy�treatments�in�India�has�attained�advance�treatment�standards�with�low�costs�and�where�India�is�accounted�with�large�population�of�English�speakers�which�avoids�language�barrier.

The�impact�of�the�falling�economy�over�educational�sector�is�that�the�students�from�other�countries� in� and� around� have� chosen� Indian� educational� institutions� to� get� educated� as�India�has�very�good�educational�facilities�which�are�of�the�advance�country�standards�and�is�comparatively�lesser�in�price.�The�students�who�travel�abroad�from�our�country�have�impact�on�them�as�their�stay�have�costs�a�lot.

The�government�promote�more�Indian�medical�treatment�abroad�so�that�most�foreigners�come�down�here�for�services.�Hospital�should�employ�more�people�understanding�people�seeking�languages�like�French,�German,�Spanish,�etc�to�make�travellers�comfortable

Conclusion:This�study�helps�to�understand�the�adverse�effect�of�rupee�depreciation�on�the�travel�and�tourism� sector.� We� can� draw� the� conclusion� with� a� positive� and� negative� light� where�inbound�travels�in�the�country�is�bringing�in�more�revenue�for�the�country.�The�foreigners�are�seeking� India�as�an�alternative� for�other�countries� in�general�and�their�homeland� in�particular.�Meanwhile,� the� Indians� are� curtailing� their� trip�with� lesser�days� in� their� tour�package�and�excluding�certain�extravagances.�They�are�finding�educations�expensive� in�the�country�because�increasing�standards�led�to�expensive�education.�The�government�is�deciding� to�curb�on�certain� imports� to� support� the�value�of�our� currency.�Surely,� in� the�coming�days�we�will�see�our�tourism�industry�serving�a�lot�to�foreign�travellers.

References:https://pdfs.semanticscholar.org/ab4c/e0a574614c2a7aa8d7c5fff9222f91f02868.pdfhttps://www.sciencedirect.com/science/article/pii/S0261517797000186https://orp.aiub.edu/FileZone/abewp/orpadmin-2009-048589862663491/AIUB-BUS-ECON-2009-04.pdf��https://www.thehindu.com/business/Economy/falling-rupee-positive-for-growth-of-inbound-tourism/article24692330.ece

“ASTUDYONFALLINGRUPEEVALUEANDITSIMPACTONTOURISM(HEALTHANDEDUCATION)ININDIA”

Diana F.R.I.M Jennifer P

PG�Department�Of�Commerce�And�Management�Mount�Carmel�College,�Autonomous�Bangalore

ABSTRACTThis� paper� focuses� on� the� fall� of� rupee� value� and� its� impact� on� Tourism� (Health� and�education)�in�India.�The�sharp�depreciation�of�the�rupee�against�major�currencies�will�help�inbound� tourism� to�grow�while� outbound� travel�will� be�hit.� Travel,� education� and�health�will�give�a�big�hit�on� Indian� citizen.� This�will� create� the� crisis� in� the�overseas� relationship�between�India.�Unfortunately�many�talents�couldn't�perceive�their�education�due�to�fall�of�rupee�and�that�would�not�benefit�our�nation.�As�a�developing�country�the�fall�of�rupee�value�will� give� a� hit� on� our� economic� growth� as� well� as� other� hand� the� business� relationship�between�the�overseas�will�be�slightly�dismantled.�According� to�Subhash�Goyal,� chairman,�tourism� committee� “A� weakened� rupee� has�made� India� a� cheaper� foreign� destination”� ,�thus,�we�can�see�that�there�is�an�all-time�increase�in��tourism�in�India�and�foreign�nationals�coming�to�India�for�the�purpose�of�education�and�healthcare�and�how�this�has�impacted�the�lives�of�both�the� local�community�as�well�as�the�foreign�nationals�and�ultimately�who�will�benefit�from�this�and�how?

Key�Words�:�Tourism,�Health�and�Education�,�Rupee�value�,�Foreign�nationals.

INTRODUCTIONThe�Indian�rupee�has�depreciated�more�than�10%�since�the�beginning�of�the�year�2018�and�is�making�headlines.�Fall� in�rupee�value�refers�to�the�weakening�of�the�value�of�rupees�as�against�US�Dollar.�This�study�revolves�around�past�5�year's�data�and�we�can�see�that�it�has�major�repercussions�on�the�local�markets�and�the�people�involved�in�them.�Fall�in�value�of�rupee�can�be�seen�within�the�scope�of�certain�characteristics�in�the�market.�There�will�be�an�

OBJECTIVES�OF�THE�STUDY·�The�main�objective�is�to�study�the�fall�of�rupee�value�and�its�effect�on�Tourism�in�India���specially�on�Health�and�Education.·�Another�important�objective�of�tis�study�is�to�know�who�are�benefitted�due�to�fall�in�rupee���value�and�how?

SCOPE�OF�THE�STUDYThis�study�will�be�useful�for�the�Government�to�know�how�the�fall�in�rupee�value�affects�the�tourism�in�India�and�specially�the�health�and�education�sectors�and�what�role�it�plays�in�the�Indian�economy.

LIMITATIONS�OF�THE�STUDY·�This�study�is�based�on�secondary�data·�This�is�a�descriptive�type�of�data·�Study�is�limited�to�the�information�available

TOURISMFirst�we�need�to� look�at�what�tourism�is�and�how�it�operates� in� India.�There�are�different�kinds� of� tourism.� There� is� domestic� tourism,� international� tourism,� spiritual� pilgrimages,�eco-tourism.�Added�to�these�we�now�have�health�and�education�tourism,�which�refers�to�many� foreigners� coming� to� India� in� order� to� study� and� to� obtain� the� benefits� of� quality�health�care�now�developing�in�India.�These�are�the�aspects�that�we�will�focus�upon�in�this�paper.�We�will�also�see�how�the�trend�in�falling�rupee�value�affects�those�within�our�country�and�residents�of�the�first�world�nations.�The�impact�of�tourism�in�both�health�and�education�sectors� should�be� seen� from� the�perspectives�of�both� the� locals� and� foreign�nationals.�A�study� report� on� “Economic� Impact� of� Tourism� in� India”� by� the� Economic� and� social�commission�for�Asia�and�Pacific(�ESCAP)�reveals�that�for�every�1.2�international�tourist�visit�provides�employment�to�one�person�a�year.

fall�in�exports�as�exports�become�cheaper�and�imports�become�expensive.�This�means�there�will�be�an�increase�in�value�of�foreign�goods.�At�the�same�time,�the�fall�in�value�of�oil�in�the�global�markets�contribute�more�towards�the�fall�in�rupee,�as�the�trend�now�seem�to�be�that�all�global�capital�is�moving�towards�the�US�markets.�All�these�trends�weaken�the�purchasing�power�of� the� common�man� in� India.� Two� things�are�quite�visible.�One,� the� rate�of�oil�has�reached� anall-time� high� in� India.� Two,� the� price� of� goods� have� increased,� especially� on�foreign�goods.�Therefore,�the�common�man�will�have�to�bear�the�brunt�of�paying�high�prices�even�for�essential�needs�like�food,�education,�shelter.,�etc.

TOURISM�:�IMPACT�ON�HEALTH�AND�EDUCATIONWith� fall� in� rupee�value,� there� is�a�possibility�of�brain�drain� in� India,�as�many�doctors�and�nurses� may� look� for� lucrative� packages� in� the� Developed� nations.� This� could� in� a� way�benefit�family�members�in�India,�if�even�a�small�portion�of�what�they�earn�returns�to�India.�They�could�also�as�NRI's�support�many�causes�in�India,�in�terms�of�contributing�towards�the�growth�of�the�nation.�But�this�could�also�be�a�bane�if�the�money�is�mishandled.�On�the�other�hand,� students� who� wish� to� pursue� studies� abroad� will� suffer� because� of� the�mounting�purchasing� value� of� foreign� currency.� Getting� and� paying� back� educational� loans� could�become�a�big�burden,�causing�problems�at�all�levels.

EDUCATION�

Students� coming� to� India� to� study� from� other� nations� will� be� subjected� to� paying�exorbitant�fees�towards�their�education,�increasing�the�income�of�private�universities.�How�much�of�these�incomes�reach�the�government�in�terms�of�taxes�could�only�be�a�matter�of�speculation.�In�other�words,�education�for�foreign�students�in�India�will�benefit�a�minority�of�entrepreneurs�who� invest� in�professional�courses� in� India.�But�this�may�affect�the� local�population�who�may�not�be�able�to�get�the�seats�for�coursesfor�which�foreigners�are�willing�to�pay�huge�amounts�of�money.�This� is�one� reason�why� India�now�promotes�educational�tourism.�There�is�ample�amount�of�evidence�to�show�that�educational�tourism�has�created�a�mess� for� the� local� population� by� increasing� the� number� of� crimes� committed� by� a� few�foreign�nationals�who�enter�India�with�a�study�visa�and�overstay.

HEALTH�(MEDICAL�TOURISTS)

This�shows�an�increase�in�the�number�of�foreign�nationals�visiting�India�for�the�purpose�of�health.�India�is�a�growing�market�in�the�health�industry.�The�government�is�forced�to�play�a�dual�role�here.�On�the�one�hand,�the�government�strives�to�provide�basic�health�care�to�all�the� citizens� of� India,� especially� in� the� rural� parts.� The� success� of� the� government� in�providing�basic�healthcare�to�all,�especially�the�poor�is�rather�questionable.�On�the�other�hand,� there�has�been�a�boom� in�healthcare� in�urban� India� catering� to� the�upper�middle�class�people,�bringing�together�all� the�good�doctors�for�a�high�salary,�with�well�qualified�nurses� as�well.� This�may�not�be�accessible� to�all� classes�of� the� society.�However,� it�must�noted� that� the� private� health� industry� has� slowly� destroyed� the� fabric� of� the� idea� of� a�healthcare�which�was� once� considered� to� be� a� service� rendered� unto� the� poor� through�mission�hospitals.

Since,�expensive�but�good�healthcare� is�not�affordable� to�all,� India�now�promotes�health�tourism,�drawing�many�people�from�various�parts�of�the�world.�With�the�fall�in�rupee�value,�the�foreign�nationals�are�able�to�buy�rupees� in� large�chunks�and�are�able�to�pay�for�their�treatments.�This�is�profitable�for�the�hospitals�and�its�investors.�The�hospitals�can�increase�the�rates�of�their�treatments�for�foreign�nationals,�while�not�really�increasing�the�salaries�of�doctors�and�nurses.

ANALYSISSo�what�does�all� this�mean?�Who�benefits� from�the�falling�rupee�value�and�who�doesn't?�Investors� in�education�and�health� tourism�sectors� certainly�benefit� from�the� fall� in� rupee�value.� But� whether� the� profits� are� distributed� in� an� ethical� way� is� what� needs� to� be�questioned.�Both�in�educational�and�health�sectors,�there�are�many�players�in�the�markets.�Pharmacy� companies,� equipment� companies,� research� and� development� sectors,� sales�departments,� infrastructure�departments,�builders.,�etc.�There� is�a� theory�that�wealth�can�spill�over�eventually�when�it�overflows�from�the�pockets�of� institutions.� If�this�were�really�true,� the� local� shopkeepers� and� small� sales�people�may�benefit� from� the�profits� that� the�health�and�tourism�sectors�make.�One�reason�why�we�may�say�this�with�certainty�is�because�those�at�the�bottom�are�still�not�able�to�get�the�education�and�healthcare�that�the�foreign�nationals� enjoy.� On� the� other� hand,� the� fall� in� rupee� value� is� not� a� permanent� trend.�Markets� are� so� malleable� and� flexible� that� there� is� bound� to� improvements,� provided�experts� in� the� field� of� economics� are� consulted� and� right� decisions� are� made� by� policy�makers� and� the� governments.� If� what� Adam� Smith� says� is� true� that� markets� have� the�tendency�to�regulate�themselves,�we�might�as�well�go�forward�in�faith.

REFERENCES�:www.wikipedia.comwww.reportlimker.com�www.livemint.com�www.financialexpress.com��

Komal GuptaM.Com,�B.EdUGC�NET,�KSET,�MH�SETAssistant�ProfessorBET�SADATHUNNISA�DEGREE�COLLEGEEmail:�[email protected]

ASTUDYABOUTDEPRECIATIONOFINDIANRUPEEVALUE

ABSTRACTThis�paper� focuses�on�falling�Rupee�value�Causes�and�its� Impact�on�Indian�Economy.�This�research� is� based� on� secondary� data� published� on� journals� and� Indian� government�websites.�As�falling�Rupee�value�has�adverse�effect�on�Indian�Economy�it�reveals�that�there�has�been�a�strong�and�significant�negative�impact�on�currency�volatility�in�many�sectors.�In�the� last�one�year� the� Indian�Rupee�has�weakened�hit�a� record� low�of�74.48�per�Dollar�on�

thOctober� 11 � 2018.� Indian� economy�which� already� suffered� from� large� fiscal� and� current�account�deficit�adversely�affected�by�relative�exchange�rate�pressure�as�falling�Rupee�value�against�Dollar�affects�Importers�and�India's�Import�is�more�when�compared�to�Export.

Keywords�:�Depreciation,�Imports,�Foreign�Currency

INTRODUCTIONMoney,�by�itself�may�be�quite�valueless.�For�ex.�intrinsic�value�of�a�100�Rupee�note�may�be�zero� after� all� it's� only� a� piece� of� paper.� However,� its� value� arises� from� the� fact� that� it� is�capable�of�purchasing�a�number�of�goods�and�services�which�are�useful�for�the�purchasers.�The� value�of�money� thus� lies� in� its� buying� capacity.� The�greater� the�buying� capacity� the�more�its�value.�According�to�Robertson,�the�value�of�money�means�“the�amount�of�things�in�general�will�be�given�in�exchange�for�a�unit�of�money.”�The�term�value�of�money�means�the�purchasing�power�of�money.�The�value�of�money�depends�upon� the�price� level�of�goods�and�services�to�be�purchased�with�money.

Foreign�exchange�comes�into�picture�when�trade�takes�place�between�two�countries�which�includes�exchange�of�goods�and�services.�Country's�development�depends�on�its�capacity�to�trade�internationally.�A�country�is�known�to�be�financially�stronger�when�the�Export�is�higher�than�Import.

Exchange�Rate�:�Means�the�price�of�a�nation's�currency�in�terms�of�another�currency.�The�market�in�which�the�currencies�of�various�countries�are�exchanged,�traded�or�converted�is�called�the�foreign�exchange�market.India�follows�flexible�exchange�rate�policy�where�the�rate�of�Indian�Rupee�depends�on�demand�and�supply�of�Indian�Rupee.

Devaluation:��When�the�external�value�of�the�domestic�currency�depreciates�while�the�internal� value� remains� the� same,� such� situation� is� known�as� the�devaluation�of� the�domestic�currency.

The�basic�difference�between�devaluation�and�depreciation�is�that,�the�devaluation�is�done�by�the�government�of�the�country�deliberately�while�the�depreciation�take�place�because�of�the�market�forces�i.e.�demand�and�supply.

At�the�time�of�independence;�India�adopted�the�Par�Value�System�of�International�Monetary�Fund�(IMF).�On�the�August�15,�1947;�the�exchange�rate�between�the� Indian�rupee�and�US�dollar�was�1USD�=�1�INR.

thIndian�Rupee�hit�a�record�low�of�74.48�per�Dollar�on�October�11 �2018�and�Rupee�has�depreciated�a�lot�against�Dollar�in�recent�economic�trends.

Objective�:�To�understand�the�reasons�behind�depreciation�of�Indian�Rupee�against�Dollar.

The�reasons�behind�the�depreciation�of�Indian�Rupee�against�Dollar�presently:1.��Increase�in�the�price�of�the�crude�oil:�As�we�all�know�that�India�produces�just�20%�crude-oil�of�its'�requirement�and�rest�is�imported�from�the�other�countries�like�Iraq,�Saudi�Arabia,�Iran�and�other�gulf�countries.�Crude-oil�is�the�biggest�contributor�in�the�import�bill�of�India.

According�to�the�report�from�energy�research�and�consultancy�firm�Wood�Mackenzie;�the�daily�fuel�demand�of�India�has�doubled�itself�to�190,000�barrels�in�2018,�when�compared�to�93,000�barrels�in�2017.

As�the�demand�of�crude-oil�is�increasing�the�bill�of�oil�import�is�also�increasing.

Data�published�by�the�Petroleum�Planning�and�Analysis�Cell�(PPAC)�points�that�India's�total�crude-oil� import� bill� in� the� current� financial� year� (2018‒2019)� is� expected� to� jump� 24%�which�will�be�$109�billion�from�$88�billion�as�seen�in�the�last�fiscal�year .

Economic�survey�2018�estimates�that�if�the�price�of�crude-oil�increases�10�dollar�per�barrel�then�the�GDP�of�India�decreases�up�to�0.2‒0.3�percent.

2.� Beginning� of� trade�war� between� USA� and� China:� The� US� President� Donald� Trump� has�initiated�the�trade�war�with�China�and�European�countries�and�India�and�these�countries�also�retaliated�in�the�same�way.�Indian�import�bill�is�always�greater�than�its�export�bill.�

It�means�that�the�trade�war�will�adversely�affect�the�Indian�market�and�India�will�also�experience�the�outflow�of�US�dollar�from�its�domestic�market.

3.�Increasing�Trade�Deficit�of�India:�A�situation,�in�which�the�import�bill�of�a�country�exceeds�its�export�bill,�is�called�trade�deficit.India's�current�account�deficit�widened�sharply�to�USD�19.1�billion,�or�2.9�percent�of�GDP,�in�July-September�2018-19�from�USD�6.9�billion,�or�1.1�percent�of�GDP,�in�the�same�period�of�the� previous� fiscal� year.� The� goods� deficit� increased� to� USD� 50.0� billion� from� USD� 32.5�billion�a�year�earlier�and�the�primary�income�gap�edged�up�to�USD�8.7�billion�from�USD�8.6�billion.� On� the� other� hand,� the� services� surplus� rose� to� USD� 20.2� billion� from� USD� 18.4�billion� a� year� ago� and� the� secondary� income� surplus� advanced� to�USD�19.4�billion� from�USD�15.7�billion.�Current�Account�in�India�averaged�-2054.58�USD�Million�from�1949�until�2018,�reaching�an�all-time�high�of�7360�USD�Million�in�the�first�quarter�of�2004�and�a�record�low�of�-31857.18�USD�Million�in�the�fourth�quarter�of�2012.

It�implies,�foreign�currency�outflow�is�more�than�inflow�with�respect�to�the�Indian�market.

As�per�the�law�of�demand;�if�the�demand�of�a�commodity�increases,�its�price�also�follows�it.�In� the� same�way;�when�more� foreign� currency� i.e.� Dollar� goes� out� of� Indian�market,� its�domestic�price�increases�and�the�price�of�Indian�Rupee�decreases.

4.�Out�flow�of�Foreign�Currency:�It�is�worth�to�mention�that�when�the�foreign�investors�find�other�attractive�markets�in�the�other�parts�of�the�world;�they�pull�out�their�invested�money�by�selling�the�equity�shares.�Dollar�is�considered�to�be�in�demand�and�the�widely�accepted�currency�around�the�world�giving�it�a�nick�name�green�currency.�So�in�such�situation�the�demand�of�dollar�increases�which�further�increases�its�price.

Foreign� Portfolio� Investors� (FPIs)� have� pulled� out� nearly�48,000� crore� from� Indian�capital�markets�in�the�first�six�months�of�2018,�making�it�the�fastest�outflow�in�a�decade.

FPIs�withdrew�a�net�sum�of�6,430�crore�from�equities�besides�41,433�crore�from�the�debt�markets�during�January-June�period�of�the�year,�taking�the�total�outflow�to�47,836�crore.

5.�Atmosphere�of�Political�Uncertainty:�As�per�many�surveys;�done�by�the�media�houses,�the�popularity�of�the�current�NDA�government�is�decreasing�which�is�creating�the�atmosphere�of�the�uncertainty�among�the�foreign�investors.

Major� point� of� uncertainty� is� that� whether� the� current� NDA� government� will� retain� the�power�at�center�or�not.�If�the�new�government�comes�in�the�power�and�changes�the�FDI�and�other�policies�then�the�money�of�investors�will�trap.

So�the� foreign� investors�are�pulling�out� their�money�from�the� Indian�market� to� invest� in�those�markets�which�can�provide�them�secured�return.��This�is�the�reason�that�the�demand�of�Dollar�is�increasing�and�the�price�of�Indian�Rupee�of�falling.

Findings:�Increase�in�the�demand�of�crude-oil�will�be�followed�by�the�increasing�import�bill�in�the�form�of�payment�of�more�dollars�to�oil�exporting�countries.�Hence�the�demand�of�dollar�will�increase�in�the�Indian�market�which�will�reduce�the�value�of�Indian�rupee.��Due�to�trade�war�between�USA�and�China�the�price�of�the�imported�commodities�will�go�up�which�will�further�increase�the�outflow�of�dollar�from�the�Indian�market.��It�is�observed�that�India�has�trade�deficit�with�regards�to�its�balance�of�payment.��A�huge�effect�has�been�seen�as�FPI�withdrew�massive�amounts�of�money�from�the�Indian�Capital�Market.�Political�stability�has�also�become�one�of�the�major�reasons�for�depreciation�of�Indian�Rupee.

Hence,�on�the�basis�of�the�combined�impact�of�the�above�mentioned�reasons�the�exchange�rate�between�the�Dollar�and�India�Rupee�is�touching�its�lowest�point.

Conclusion:RBI�and�Government�of�India�need�to�work�together�and�put�the�required�effort�in�the�near�future,only�then�depreciation�trend�in�the�Indian�currency�can�be�checked�upon.

Reference:https://www.iracst.org/ijcbm/papers/vol3no12014/10vol3no1.pdfhttps://www.researchgate.net/publication/309488226_Impact_of_Rupee-Dollar_Fluctuations_on_Indian_Economyhttp://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.649.2892&rep=rep1&type=pdfhttps://www.poundsterlinglive.com/bank-of-england-spot/historical-spot-exchange-rates/usd/USD-to-INRhttps://tradingeconomics.com/india/importshttps://www.jagranjosh.com/general-knowledge/why-rupee-is-falling-against-dollar-1530858596-1https://tradingeconomics.com/india/current-account

Dr. Mohammed Ashfaq AhamedAssistant�Professor�in�EconomicsCrescent�Group�of�InstitutionsMosque�Road,�Basavanagudi,�Bangalore�‒�560004

ABSTRACTThis� article� examined� the� impact� of� rupee� depreciation� on� India's� BOP.� The� analysis�revealed�that�Indian�rupee�is�continuously�losing�its�value�against�the�US�Dollar,�posing�a�threat�and�a�challenge�to�India's�Balance�of�Payments.�The�major�cause�since�liberalization�has� been� the� growing� Current� Account� Deficit� due� to� which� the� Indian� currency� has�noticed�its�depreciation�in�terms�of�US�$.�The�current�account�of�BOP�has�seen�a�deficit�by�15.39%�since�the�year�1991.Depreciation�though�seen�as�a�measure�still�poses�one�of�the�challenges�before�India's�Balance�of�Payments.�It�goes�a�long�way�to�reduce�deficit�under�Current�Account�unless�and�until�the�rate�of�exports�increase�at�a�drastic�rate�rather�than�the�rate�of�growth�across�imports.Keywords�:�BOP,�Currency�Depreciation,�Devaluation�and�Exchange�Rate

INTRODUCTIONThe� growth� of� BOP� since� the� initiation� of� Five� Year� Plans� in� India� has� been� dwindling�due�to�various�economic�shocks.�The�First�Plan�period�even�though�was�a�comfortable�on�BOP� in� India,� but� was� inflicted� by� the� trauma� of� partition� and� American� Recession.� The�second�plan�had� adopted� the�Mahalanobis�model,�which� restricted� the� essential� imports�and� encouraged� a� strong� import-substituting� approach� and� importance� to�industrialization.�During� third�five�year�plan,� India�suffered�severe� foreign�exchange�crisis�leading�to�unfavorable�BOP.� It� further�worsened�during�the�three�annual�plans,�despite�of�the�devaluation�of�the�rupee�in�1966.�The�Fourth�plan�continued�the�inward�looking�policies�of�previous�years�with� little�emphasis�on� foreign� trade.�The�Fifth�and�Sixth�five�year�plan�gained�BOP�surplus�due�to�the�remittances�of�Indians�working�in�Middle�East�and�also�due�to� boom� in� the� oil� prices.� There� was�massive� amount� of� net� invisibles� of� Rs.� 6221� crore�registered�during�this�period.��In�the�Sixth�Plan,�India�had�to�go�for�Extended�Fund�Facility�borrowing�from�IMF�in�1981-82�even�though�the�net�invisibles�remained�positive.�

IMPACTOFRUPEEDEPRECIATIONONINDIA'SBALANCEOFPAYMENTS

Dr.�Bimal� Jalan�observed� that� “India�experienced�BOP�problems�due� to� its� inward� looking�strategy�of�the�post-independent�economic�planning.�India�has�remained�more�of�a�closed�economy�than�even�China�and�Russia.”�It�gave�major�importance�to�imports�due�to�which�the�rupee�faced�depreciation�in�terms�of�foreign�currencies.�This�was�the�brief�account�of�the�

In�this�case,�the�value�of�the�domestic�currency�in�terms�of�foreign�currency�is�officially�lowered�It�is�the�policy�that�believes�that�the�developing�countries�should�limit�foreign�trade�and�protecting�their�industries.It�is�a�part�of�Balance�of�payments�that�involves�trade�in�services�or�intangible�goods.In�this�case,�the�value�of�the�domestic�currency�in�terms�of�foreign�currency�is�lowered�by�market�forces.

India's� BOP� before� the� onset� of� economic� reforms� in� 1991.� Henceforth� this� article�provides�an�analytical�account�on�the�impact�of�rupee�depreciation�on�India's�BOP�position�since� the� implementation� of� liberalization,� privatization� and� globalization� policies� of�economic�reforms.

RESULTS�AND�DISCUSSIONSince� 1991,� liberalization� policy� was� adopted� in� India� which� gave� a� definite� boost� to�exports,� flow� of� Foreign� Direct� Investment� (FDI)� and� portfolio� investment� by� Foreign�Institutional� Investors� (FII).� Development� Strategy� of� both� inward-looking� and� highly�interventionist,� consisting� of� import� protection,� complex� industrial� licensing�requirements� etc� underwent� radical� changes� with� the� liberalization� policies� of� 1991�(Mathew� 2013).Before� independence,� Britain� were� dominating� the� Indian� economy� and�therefore� Indian� rupee�was� linked� to� their�national� currency� i.e.,� Pound�Sterling.� Further�during� September� 1975,� the� rupee� was� delinked� from� pound� sterling� due� to� declining�share�of�Britain� in� India's�trade.�Later�on�till� the�economic�reforms� in�1991,�the�exchange�rate�was�officially�determined�by�RBI.� �The�beginning�of�1990s�witnessed�rise�in�oil�prices�and� foreign� remittances� from� the� Gulf� region� were� withdrawn.� This� led� to� severe� BOP�deficit� in� India.� Even� the� Indian� rupee� noticed� depreciation� by� 29.7� per� cent.� Chart� 1�depicts�the�exchange�rate�of�Indian�rupee�in�terms�of�US�dollars�and�by�what�rate�the�rupee�witnessed� its�appreciation�and�depreciation� in� terms�of�growth�rate.�There�are� two�main�concepts�involved�in�Exchange�Rate.�One�is�the�Appreciation�in�which�the�exchange�rate�of�the�domestic�currency�gains�its�value�against�the�foreign�currency.�The�other�concept�is�the�Depreciation�which�is�the�loss�value�of�domestic�currency�against�the�foreign�currency.�It�is�usually�seen�as�a�method�to�correct�the�disequilibrium�in�the�Balance�of�Payments.

The� major� cause� of� concern� since� liberalization� remained� the� depreciation� of�Indian�Rupee.�Indian�rupee�is�continuously�losing�its�value�against�the�US�Dollar,�posing�a�threat�and�a�challenge�to�India's�Balance�of�Payments.�Mathew�2013�observes�that�“Grim�global�economic�outlook�along�with�high�inflation,�widening�current�account�deficit�and�FII� outflows� have� contributed� to� the� fall� in� the� value� of� Indian� rupee� against� the� US�Dollar.”It�reveals�that�the�Indian�currency�has�seen�appreciation�against�US�Dollars�seven�times� only� that� too� with� negligible� increase.� In� the� year� 2007-08,� Indian� rupee�appreciated�by�8.74�per�cent�which�is�comparatively�highest.�The�main�cause�attributed�was�that�the�foreign�investment�has�risen�almost�by�108%.�It�stood�at�29743�million�$�in�2006-07� which� saw� a� sudden� jump� to� 62000� million� dollars� in� 2007-08.� Since�liberalization,�the�Indian�currency�has�depreciated�by�4.14�per�cent�CAGR.

Henceforth� the� impact� of� rupee� depreciation� on� India's� BOP� since� economic�reforms�can�be�assessed.�Table�1�provides�an�account�on�net�balance�on�the�current�and�capital� account� on� BOP.� Current� account� of� BOP� includes� all� the� recurring� transactions�such� as� exports� and� imports� of� goods� and� services� along� with� unilateral� receipts� and�payments.� On� the� other� hand� capital� account� includes� non-recurring� transaction� on�capital� assets� including� commercial� borrowings,� foreign� investments,� rupee� debt�services,�external�assistance�etc.Deficit(-)��indicates�that�inflows�are�less�than�the�outflows�whereas� Surplus� (+)� indicates� that� the� inflows� are� more� than� the� outflows.

Table� 1� reveals� that� the� major� cause� since� liberalization� has� been� the� growing�Current�Account�Deficit�due�to�which�the� Indian�currency�has�noticed� its�depreciation� in�terms�of�US�$.�The�current�account�of�BOP�has�seen�a�deficit�by�15.39%�since�the�year�1991.�Indian� Government� announced� the� Liberalized� Exchange� Rate� Management� System�(LERMS)�and�devalued�the�rupee�in�that�year�by�23%.��Due�to�this,�exports�grew�by�20%�in�the� consecutive� year� (1993-94)� and� the�Balance�of�Payment�Account� stood� surplus�with�

Table�1Trends�in�India's�Balance�of�Payments�(in�million�$)

Note:�*refers�to�Compound�Annual�Growth�RateSource:�Derived�from�RBI's�“Handbook�of�Statistics�on�Indian�economy”�2017-18

$8536�million.�As�a�part�of�economic�liberalization,�the�government�introduced�a�series�of�trade� reforms� which� aimed� at� making� exports� competitive.� The� net� invisibles� under�current� account� registered�around�50.8�per� cent�which� led� to�BOP� surplus.� This�helped�India�in�recovering�its�BOP�situation.�Later�in�the�year�1995-96,�the�India's�BOP�suffered�a�deficit�of�around�$1224�million�as�the�earnings�from�net�invisibles�declined�by�4.1�%.�

During� 2007-08,� India� witnessed� surplus� in� BOP� account.� It� was� all-time� high� at�$92167�million.�Account-wise�outlook� reveals� that� the� surplus� in� the� capital� account�was�also� all-time� high�with� 133.7� per� cent� increase� from� the� previous� year.� Exports� grew� by�20.8%�and�the�earnings�of�net�invisibles�with�45%�increase�and�foreign�investment�grew�by�108%� in� that� year.� Indian� rupee� also� appreciated� by� 8.74� per� cent.� Kumar� et.al� (2009)�observed� that� “Inflation� rates� were� quite� high� during� that� period.� Concerned� by� the�inflationary�pressures,�Reserve�Bank�of�India�increased�the�interest�rates,�which�resulted�in�a�slowdown�of� India's� trade� flows�prior� to� Lehman� crisis”.� Lehmann�was� the� fourth� largest�investment�bank�of�the�US�which�got�bankrupt�in�September�2008.�Most�of�the�sub-prime�loans�were�packaged� into�mortgage-backed�securities�which� in� turn�defaulted� leading� to�Lehmann�Crisis.Due�to�this,� Indian�economyfaced�all-time�high�BOP�deficit�which�stood�at�20086�million�$.�The�Capital�Account�surplus�saw�a�decline�by�92%�and�the�Current�Account�Deficit�increased�by�77%�in�that�year.

During� the� year� 2011-12,� India� witnessed� again� BOP� deficit� with� amount� standing� at�12832�million�$.�It�was�due�to�the�rising�dependence�on�oil�imports�and�rising�demand�for�petroleum� products,� which� raised� the� import� bill� by� 30%� in� that� year.The� foreign�investments�however�have�declined�by�16.8%,�but�the�hike�in�the�inflow�of�NRI�deposits�accentuated�for�the�increase�in�the�Capital�Account�surplus.�Further�in�the�year�2012-13,�the�Capital� Account� Surplus� increased� further� by� 53.4%�due�of� the� depreciation� of� the�Indian�currency�by�14.49%.

In� the� year� 2017-18,� Indian� currency� appreciated� by� 3.1� per� cent.� Even� though� the�Current�Account�Deficit�saw�a�drastic�increase�by�237.9�per�cent,�but�on�the�other�hand�the�Capital�Account�surplus�also�witnessed�increase�by�156.6�per�cent.�Overall,�the�BOP�status�of�the�Indian�economy�was�favorable�with�surplus�amounting�to�43575�million�$.

Concluding�RemarksEvery� country� wishes� to� have� favorable� Balance� of� Payments� for� improving� its�prospects�in�international�market�frontiers.� India�witnessed�quite�unfavorable�Balance�of�Payments� during� its� entry� into� the� liberalized� trade� regime� (See� Mathew� 2013).� Since�liberalization,� the� current� account� is� facing� deficit�more� often.� It� is�mounting� in� recent�years.� � This� poses� a� serious� challenge� for� India's� Balance� of� Payments.� Government� is�adopting�various�strategies�in�order�to�lessen�the�Current�Account�Deficit.� Imports�tariffs�are�being�imposed�for�restricting�imports,�but�still�India�is�not�able�to�decrease�its�import�bill�considerably.�Depreciation�though�seen�as�a�measure�still�poses�one�of�the�challenges�before�India's�Balance�of�Payments,�which�tend�to�make�our�imports�costlier.�It�goes�a�long�way�to�reduce�deficit�under�Current�Account�unless�and�until�the�rate�of�exports�increase�at�a�drastic�rate�rather�than�the�rate�of�growth�across�imports.

ReferencesndDewett,�K.K�(2005),�“Modern�Economic�Theory”�,�22 �Golden�Jubilee�Edition,�

S.Chand�Publications,�New�Delhi

GOI�(2012),�“Trade�and�External�Sector”,�Economic�Outlook�2012-13,�pp-66-73

Kumar,�Nagesh�(2013),�“Trade,�Capital�Flows�and�the�Balance�of�Payments:�Trends,�Challenges�and�Policy�Options�for�India”�South�and�South�West�Development�Papers�1303,�United�Nations�ESCAP

Kumar�et.al.,�(2009),�“Indian�Economic�Outlook:�2008-09�and�2009-10”,�ICRIER�Working�Paper�No.�234,�ICRIER,�New�Delhi

Mathew,�Jomon�(2013),�“Trends�and�Challenges�of�India's�Balance�of�Payments”,�Munich�Personal�RePEc�Archive,�Paper�No.�51167�pp�1-12

RBI�(2018),�“Handbook�of�Statistics�on�Indian�Economy�2017-18”,�Reserve�Bank�of�India,�Mumbai

IMPACTOFFALLINGRUPEEONTOURISM

FarheenNajmaFaculty,Dept.�of�Commerce�and�ManagementSt.�Hopkins�College�of�[email protected]

ABSTRACTThis� paper� has� been� initiated� for� the� purpose� of� acquainting� and� gaining� in-depth�knowledge�of�the�impact�of�what�rupee�fall�has�done�for�tourism�in�India�and�other�foreign�destinations.�The�study�encompasses�the�positive�and�the�negative�impact�of�depreciating�rupee� on� tourism� including� its� effects� on� hotel� industry,� travelers� and� other� related�services.The� sharply� depreciating� rupee� has� caused� trouble� for� India.� But� there� is� one�industry� that� should� benefit� from� the� currency's� weaker� status:� Tourism.� The� sharp�depreciation�of�the�rupee�against�major�currencies�can�help�inbound�tourism�to�cultivate�while�outbound�travel�will�undoubtedly�be�hit.

INTRODUCTIONBefore�we�learn�about�the�impact�of�falling�rupee�on�tourism�industry,�lets�understand�What�happens�when�the�rupee�falls?�Weak�rupee�will�hurt�firms�dependent�on�imports�and�foreign�currency�borrowings.�...�Oil�imports,�amid�rising�crude�oil�prices�are�leading�to�an�increased�demand�for�the�dollar�which,�in�turn,�is�making�the�rupee�weaker.

What�does�this�mean�for�you?A�depreciating�rupee�means�higher�prices�of�goods�and�services,�costlier�petrol�and�trips�abroad�turning�more�expensive.�The�steady�fall�in�the�value�of�Indian�rupee�this�year�against�major�currencies�of�the�world�has�made�imported�goods�more�expensive,�sent�fuel�prices�soaring�and�cast�a�shadow�on�international�travel�plans.

A� weaker� rupee� makes� it� cheaper� for� foreign� tourists� to� holiday� in� India̶making� the�country� a�more� attractive� destination� for� travellers� from� developed� economies.Leisure,�business�and�students�are�the�three�major�segments�of�Indian�travellers�who�plan�a�visit�to�the�USA There�has�not�been�much�fall�in�the�overall�number�of�tourists�travelling�to�India�.from�USA�due�to�depreciation�of�the�rupee�against�the�dollar.

OBJECTIVES·�To�analyse�the�impact�of�depreciating�rupee�on�inbound�and�outbound�travel.·�To�study�whether�the�impact�is�positive�or�negative.·�To�know�which�gives�better�income�(inbound�or�outbound)

LITERATURE�REVIEWWhile�the�rupee's�depreciation�against�the�US�dollar�has�grabbed�eyeballs�the�most�due�to�the�macroeconomic�reasons,� it�has�also� fallen� in�value�against�currencies�of�countries� that� rank�high�on�popular�destinations�among�Indians�tourists.

Dubai,�Saudi�Arabia,�Bahrain�and�Thailand�are�some�such�popular�destinations�beyond�the�United�States,�shows�a�study�released�early�this�year�by�CAPA�India�and�Expedia.

Top� leisure�destinations�for� Indians�were�Dubai,�Thailand,�France,�Singapore�and�Malaysia,�with�the�top�five�accounting�for�over�50�per�cent�of�departures.�And�Indian�travellers�spend�a�significant�amount�of�money�abroad,�estimated�at�$16.4�billion�for�2016.

Business� travel� accounted� for�26�per� cent�of�outbound� trips,�while�visiting� friends�and�relatives,�employment,�education,�pilgrimage�and�others�accounted�for�the�balance�of�44�per�cent.

But,�over�2018,�the�rupee�has�steadily�depreciated�against�the�currencies�of�every�country�mentioned�above.�The�sharpest�depreciation�was�seenagainst� the�Thai�Baht�at�14.79�per�cent�since�January�1,�2018,�while�the�mildest�was�against�the�Euro,�at�9.84�per�cent.�Middle-Eastern�currencies� like� the�UAE�Dirham,�Saudi�Riyal� and�Bahraini�Dinar�have�appreciated�around�13-13.6�per�cent�against�the�rupee,�while�the�Malaysian�Ringgit�and�the�Singapore�Dollar�have�strengthened�by�more�than�11�per�cent.

This�has�driven� travel�and�boarding�costs�up�by�more� than�10�per� cent� to�most�popular�destinations,� even�after�discounts� from� travel� agencies,� around�a�quarter�of� vacationers�who�have�flown�over�the�three�months�have�requested�changes� in�the�packages�as�trips�became�more�expensive.�“Many�have�requested�changes,�mostly�in�accommodation.�But,a�few�have�cancelled,”

The�drop� in� rupee�value� is� a�double-edged� sword� for� the� tourism� industry.�While� foreign�travellers�will�prefer�India�as�a�vacation�option,�the�domestic�hospitality�sector�may�bear�the�brunt�of�high�import�prices�for�certain�liquor�and�food�items.

ADVANTAGES·��Another�positive�impact�is�an�increase�in�the�number�of�foreign�travellers�to�India·��Uttar�Pradesh�and�Rajasthan�could�be�some�of�the�sought-after�destinations�among����foreign�travellers.·��The�sharp�depreciation�of�the�rupee�against�major�currencies�can�help�inbound�tourism�to����cultivate�while�outbound�travel�will�undoubtedly�be�hit.·��Travellers�are�more�likely�to�want�to�benefit�from�positive�exchange�rates�and�would�plan����happen�to�be�countries�whose�currencies�had�weakened�contrary�to�the�rupee�like�South���Africa,�Mexico�and�turkey.

DISADVANTAGES·��Hotel�tariffs�and�shopping�get�expensive·��As�the�price�of�rupee�falls,�liquor�and�food�items�that�we�import�automatically�get�very����expensive.�·��Another�disadvantage�that�the�industry�will�face�is�that�the�guest�who�pays�in�dollars����would�get�the�hotel�room�at�a�cheaper�rate·��Other�factors�such�as�utility�and�procurement�costs�going�up�will�strain�profits·��The�rupee's�decline�will�be�harmful�to�outbound�travel.�

RESEARCH�METHODOLOGYThe�paper�is�overall�descriptive�in�nature�and�is�based�on�the�data�collected�from�primary�source�(questionnaire)�and�secondary�source�(web�portals).�The�data�is�collected�from�20�sample�respondents�from�various�professions�(both�Indian�Nationals�and�NRI's)�inclusive�of�doctors,�engineers,�teachers,�home�makers,�chartered�accountants�etcwith�the�help�of�structured�questionnaire.

DATA�ANALYSISWhich�one�do�you�think�gets�better�income,�Inbound�/Outbound�travel?

Gl ` msl b� rp_t cj 5. #

Msr` msl b� Rp_t cj 1. %

Analysis:�It�was�observed�that�inbound�travel�gets�better�income�to�the�economy�in�comparison�to�the�outbound.If�the�rupee�weakens�further�against�dollar�would�you�trade�down?

Maybe����50%

Yes�����������35%

No������������15

Analysis:�it�was�further�noticed�that�many�of�the�respondents�were�not�really�sure�about�trading�down�given�the�circumstances.�It�was�a�mixed�response.

FINDINGS·�The�domestic�tourism�could�grow�as�more�tourists�visit�India�since�their�currency�now�buys���more�here.�In�the�medium�term�export�oriented�industries�may�also�create�jobs.�·�For�vacationers�who�have�already�paid�for�packages,�shortening�the�number�of�days�would���help�cut�expenses.·�Travel�to�the�US�is�primarily�business-oriented�and�only�18�per�cent�Indians�chose�it�as�a���tourist.·�Outbound�travellers�now�have�to�shell�out�more�‒�overall�if�packages�or�tickets�haven't���already�been�booked,�and�for�miscellaneous�expenses�in�cases�of�packages�already�paid�up.·�Business�travel,�as�well�as�outbound�tourism,�has�been�steadily�increasing,�but�the�value���of�rupee�is�threatening�to�slow�them�down.·�Indian�rupee�has�lost�its�value�and�the�value�of�foreign�currency�is�more�compared�to�Indian���rupee.·�It�was�also�found�that�strong�dollar�gives�a�good�exchange�rate.·�Purchasing�power�has�gone�up.·�Foreigners�have�a�higher�purchasing�power�in�India�when�they�convert�dollars�to�rupees.·�Would�merit�for�more�spending.

SUGGESTIONS·�Earning�abroad�and�spending�in�India�seems�like�the�best�option�right�now�·�The�best�way�to�beat�the�rupee's�impact�on�your�travel�budget�is�to�readjust�travel�plans.·�The�best�way�to�do�so�would�be�to�modify�plans�for�accommodations,�reduce�the���duration�of�the�vacation�and�look�for�cheaper�flights.·�For�vacationers�who�have�already�paid�for�packages,�shortening�the�number�of�days�would���help�cut�expenses.

CONCLUSIONLooking�at�the�responses�collected�it�may�be�concluded�that�people�opt�to�trade�down�by��reducing�the�duration�of�the�travel,�by�opting�to�stay�in�a�4�star�accommodation,�by�cutting�back�on�shopping�to�cut�down�expenses�while�on�a�trip.�Depreciation�of�the�rupee�against�dollar�would� help� inbound� tourism� to� grow�while� it�will� have� a� negative� impact� on� the�outbound�tourism.A�weakened�rupee�would�make�India�an�attractive�and�cheaper�foreign�destination�in�terms�of�affordability.�Foreigners�find�it�attractive�as�they�have�to�spend�less.

REFERENCEShttps://www.hindustantimes.com/india-news/what-rupee-fall-has-done-for-tourism-in-india-and-other-south-east-asian-countries/story-4CYLQDxyuWJe9j8XHCbCwJ.htmlwww.thehindu.comwww.financialexpress.comwww.economicshelp.orghttps://travelwirenews.com

ANNEXURE

1.�Are�you�an�Indian�or�Foreigner�or�NRI?

2.�Do�you�think�the�falling�rupee�has�impacted�tourism�industry?

3.�If�yes�then�has�it�impacted�positively�or�negatively?

4.�Is�the�impact�more�on�inbound�tourism�or�outbound�tourism?

�5.�Which�one�do�you�think�gets�better�income?

6.�"A�weakened�rupee�has�made�India�a�cheaper�foreign�destination

7.�Do�you�think�the�rupee's�decline�would�be�good�for�out�bound�travel�or�bad.

8.�Please�specify�the�reason�for�your�response.

9.�If�the�rupee�weakens�further�against�dollar�would�you�trade�down?

10.�If�yes,�then�how�would�you�trade�down?

FALLINGVALUEOFRUPEEANDITSIMPACTONTHEINDUSTRYANDSERVICESECTOR

Nasreen Taj .MAssistant�Professor�Dept�of�commerceBET�Sadathunnisa�CollegeBangalore

ABSTRACTIndian�Economy� is� a�developing�economy�and� is�dependent�on�global� economy.�Overall�growth�performance�and�stability�in�the�global�economy�is�very�important�for�the�growth�of� the� Indian� economy.�Developing� economies� are� dependent� on�developed� economies�hence;� economic� fluctuations� in� world� market� have� severe� impact� on� the� developing�economies� like� India.� This� impact� is� on� Trade� Pattern,� Export,� Import� and� on� Domestic�market,�too.�Domestic�market�is�the�market�of�all�three�sectors�of�economy�viz;�Agriculture,�Manufacturing,�and�services�sector.�Growth�of�these�sectors�reflects�growth�in�GDP�also.�

The�present�paper�has� to� analyze� the� effects� on� Indian� currency�depreciation� against� the�dollar.� The�data� collected� for� the� study� is� secondary�one.� The� required�data� for� the� study�were�collected�and�compiled�from�the�RBI�Website�and�Bulletin.�The�study�concluded�that�the�exchange� rate� in� Indian�currency�was�highly�depreciation�of�Post-liberalization�period�and�also�its�impact�on�the�Indian�economy.�So,�in�order�to�Indian�government�take�necessary�step�in�to�introduce�new�economic�policy�to�switch�over�this�scenario.�

Key�words:�Rupee�Depreciation,�GDP,�Domestic�market,service�sector.

INTRODUCTION�Depreciation� refers� to�a� fall� in� the�value�of� the�domestic� currency�which� is�caused�by�the�demand�for�foreign�currency�exceeding�its�supply�in�the�market.�In�such�a�situation�one�has�to�pay�more�than�before�to�get�units�of�foreign�currency.�This�fall�takes�place�in�the�market�and� on� its� own.� Market� determined� exchange� rate� serves� the� purpose� of� aligning� the�domestic� economy� with� the� world� economy� was� the� price� route.� As� consequences� the�domestic� price�gets� linked�up�with� those�of� the�world�price.�With� the� liberalizations� and�globalization�of�the�economy�in�recent�years,�imports�are�bound�to�increase.�The�lessening�of� restrictions� on� imports� and� lowering� of� tariff� on� imports� which� the� economic� reform�

Everything�that�grows�also�changes�its�structure.�Similarly,�a�growing�economy�also�changes�the� proportions� and� interrelations� among� its� basic� sectors̶� agriculture,� industry,� and�services�and�between�other� sectors̶�rural� and�urban,�public�and�private,�domestic-�and�export-oriented.

The�structure�of�an�economy�can�be�seen�by�comparing�its�share�between�the�three�main�sectors�agriculture,�industry,�and�services�in�the�country's�total�output�and�employment.�

1.IndustrializationWith�the�increase�in�people's�income,�their�demand�for�food,�the�main�product�of�agriculture�reaches� its�natural� limit,�and� they�begin� to�demand� relatively�more� industrial�goods.�As�a�result�industrial�output�takes�over�a�larger�share�of�GDP�than�agriculture�and�employment�in�industry�becomes�predominant.

2.�Post�IndustrializationAs� incomes� continue� to� rise,� people's� need� becomes� less� “material”� and� they� begin� to�demand� more� services� especially� in� health,� education,� entertainment,� and� many� other�areas.� This� makes� services� more� expensive� relative� to� agricultural� and� industrial� goods,�further�increasing�the�share�of�services�in�GDP.�The�lower�mechanization�of�services�is�also�one� of� the� reasons� why� employment� in� the� service� sector� continues� to� grow� while�employment� in� agriculture� and� industry� declines� because� of� technological� progress� that�increases�labour�productivity�and�eliminates�jobs.�Eventually�the�service�sector�replaces�the�industrial�sector�as�the�leading�sector�of�the�economy.

3.�Service�Sector�in�IndiaThe� Services� Sector� constitutes� a� large� part� of� the� Indian� economy� both� in� terms� of�employment�potential� and� its�contribution� to�national� income.�This� sector� covers�a�wide�range� of� activities� from� the� most� sophisticated� in� the� field� of� Information� and�Communication�Technology�to�simple�services�pursued�by�the�informal�sector�workers,�for�example,�vegetable�sellers,�hawkers,�rickshaw�pullers,�etc.�The�following�broad�grouping�of�activities�can�be�considered�to�form�part�of�the�Services�Sector:

Objective�of�the�Study•To�Study�the�Growth�and�Development�of�Service�Sector�in�India.•To�Study�the�Impact�falling�rupee�value�on��Service�Sector�in�Indian�Economy.

implies,�an�increase�in�imports�has�in�fact�taken�place.�Again�with�trade�having�become�an�important�element�of�the�new�strategy�of�growth.

Impact�of�falling�rupee�on��Service�Sector�In�Indian�Economy

The�Indian�Rupee�has�touched�an�all-time�low.�The�immediate�reaction�is�to�worry�about�the�inflation� and� the� negative� impact� on� finances.� Stock�markets� have� reacted� negatively� as�foreign� investors� are� pulling� money� out� of� emerging� markets� including� India.� Things�happening�around�us�point�to�a�particular�direction.�As�an�investor,�an�important�skill� is�to�have�an�ability�to�connect�the�dots.�This�applies�to�your�personal�finances�too.�Being�aware�of�the� implication�of�economic�developments�on� investments�can�not�only�help� save�money�but�also�seize�opportunities.

The� rupee�value�has�depreciated�as� interest� rates�are� rising� in� the�US�and�the�US�dollar� is�strengthening�against�most�currencies�around�the�world.�Those�investing�money�in�financial�markets�world�over�are�getting�risk-averse.�This�means� it� is�safer�to�keep�money�in�the�US�bonds�than�invest�in�risky�equity�or�debt�assets�outside�the�US.�This�has�resulted�in�a�selloff�in�major�global�markets�including�India.There�are�two�ways�to�look�at�the�rupee�situation�̶as�a�consumer�and�as�an�investor.If�you�are�a�consumer�of� imported�goods,�travel�abroad�and�foresee�a�significant�expenditure�in�foreign� exchanges,� you� may� look� at� it� as� a� time� for� reflection.� You� may� want� to� assess� your�expenditure�according�to�priority�and�create�a�phased�schedule�for�your�foreign�exchange�spent.�As�an�investor,�you�may�look�at�it�as�an�opportunity�to�rejig�your�investment�portfolio.�A�no-brainer�is�to�invest�in�companies�that�benefit�due�to�a�fall�in�the�rupee.�A�weaker�rupee�helps�export-oriented�companies�like�those�in�technology�services�and�pharmaceuticals.�They�get�a�tailwind�to�profits�as�companies�convert�dollars�to�rupees.�Needless�to�say,�IT�and�pharma�shares�gained�ground�over�the�past�one�month.

Research�MethodologyThe�study�is�based�on�the�secondary�data�which�were�collected�from�different�published�sources�like:�RBI�Bulletins,�Online�Data,�Research�Journals,�Articles,��etc

Impact�of�Development�in�SocietyCommon�TraditionsThe�development�of�information�technology�has�influenced�the�common�traditions�of�a�society.�The�influence�of�information�technology�on�religious�practices�has�mainly�been�to�the�effect�of�making�information�about�them�more�accessible.

Cultural�ContinuitySocial� attitudes� have� changed� with� the� effect� that� citizens� of� a� society� now� expect� the�various�elements�of�the�society�to�be�better�informed�than�previously.�They�also�expect�to�be�able� to� access�more� information� about� a� specific� product,� service� or� organization� so� that�they�can�make�informed�decisions�with�regard�to�their�interactions�with�that�entity.

InstitutionsThe�Information�Technology�in�particular�has�“improved”�the�processes�by�which�the�institutions�viz.�Government,�Commercial�Businesses,�News�&�Media�organizations,�Educational�organizations�accomplishes�their�task�or�goal..

ConclusionThe�fall�in�the�value�of�currency�affects�a�lot�of�economic�growth�indicators.�Depreciation�of�rupee�reduces�the�inflow�of�foreign�capital,�rise�in�the�external�debt�pressure,�and�also�grow�India's�oil�and�fertilizer�subsidy�bills.�The�most�positive�impact�of�depreciation�of�rupee�is�the�stimulation�of� exports� and�discouraging� imports� and� thus� improving� the� current� account�deficit.�

ReferenceNayyar,G.�(2009):�“The�Nature�of�Employment�in�India's�Service�Sector”,�paper�provided�

by�University�of�Oxford,�Department�of�Economics.

“The�Shift�to�the�Service�Economy”�by�Institute�for�Monetary�and�Economic�Research�in�July�2006.

The�Service�Industry�Journal,�January�2004.

�Rabanal,�P.,�Tuesta,�V.�(2013).�“Nontradable�Goods�and�the�Real�Exchange�Rate”,�Open�

Economies�Review,�24(3),�pp.�495-535.�

Sumanjeet�(2007),�“Appreciation�of�the�Indian�Currency:�Implications�for�the�Indian�

Economy”,�World�Affairs:�The�Journal�of�International�Issues,�Vol�11,�No.�4,�Winter,�pp�52-69

Jay�Kandampully,�(2009),�“Service�Sector�has�major�role�in�growth�expert”,�Economic�News,�

20th�Dec�2009.

G.�Ramakrishna�(2010)�“Open�Policies�and�Service�Sector�Growth�in�India:�Does�Service�Sector�

Growth�Influence�Economic�Growth�of�India?”�Osmania�University�(OU)�-�Department�of�

Economics,�July�1,�2010.

“ASTUDYONFALLINGRUPEEVALUEANDITSIMPACTONINDIANECONOMY”

Maseeha Arjumand Nousheen Imran PG�Department�of�Commerce�and�Management

MOUNT�CARMEL�COLLEGE,�AUTONOMUS

ABSTRACTThis�paper�explores�the�impact�on�falling�rupee�value�and�its�impact�on�Indian�economy.�The�data�collected�for�the�study�is�secondary�one.�The�required�data�were�collected�from�various�journals,�website�and�magazines.�This�paper�also�helps� in�determining�and�understanding�the�causes�for�the�decline�of�rupee�against�dollars.�It�also�talks�about�the�concept�of�falling�of�rupee�will�affect�a�lot�of�growth�economic�indicators.�The�connection�between�value�of�local�currency� in� terms� of� foreign� currency� and� export� competitiveness� of� any� country� is� very�complex,�during� last�one�year� Indian� rupee�weakens�many� times�and� is�ceaselessly� falling�and�its�value�had�declined�by�12%�between��Jan-�Sep�2018�and�the�exchange�rate�between�dollar�and�rupee�was�floating�around�72.51=�1�dollar.

Key�Words:�falling�of�rupee,�imports�and�exports.

INTRODUCTIONWhat� is� meant� by� falling� rupee?� Value� of� any� currency� diminishes� when� its� demand�diminishes�and�furthermore�if�the�demand�for�the�USD�expands,�rupee�along�with�numerous�different� currencies�debilitates�against�USD.� India�being�a�developing�economy�with�high�inflation�falling�of�Rupee�is�very�normal.�

Falling�of�rupee�is�great�as�long�as�it�isn't�unstable.�An�irregular�depreciation�that�we�have�found�over� the�most� recent�couple�of�months� is� terrible�and� it�has�harmed� the�economy.�Appreciation�in�the�USD�has�led�to�the�decrease�in�value�of�Indian�rupee.�A�few�factors�for�example,�Rising�crude�oil�prices,�higher�capital�flow,�fortifying�dollar�and�so�on�are�adding�to�the�depreciation�of�the�rupee.

For�example�:�A�family�is�travelling�to�US�one�week�from�now�on�vacation,�flight�tickets�and�hotel�booking�were�done�in�advance.�So�why�should�falling�of�rupee�trouble�them?��It�ought�to�be�in�light�of�the�fact�that�every�single�expenses�such�as�sightseeing,�local�transfers�and�food�will� increase�because�of�the�fall� in�the�rupee.�There�are� likewise�few�merits�of� falling�rupee,�those�working�abroad�will�pickup�as�the�same�amount�they�remit�will�convert� into�more�rupees.

Falling�of�rupee�lessens�the�inflow�of�foreign�capital,�increase�in�external�debt�pressure�and�further�more�develop� India's�oil.� The�positive�effect�of� falling�of� rupee� is�encouraging�of�exports�and�discouraging�imports�and�thus�enhancing�the�current�account�deficit.�

Even� after� huge� increase� in� exports� and� sales� Indian� companies� are� revealing� gigantic�foreign�exchange�losses�due�to�falling�of�the�Indian�rupee�this�decreases�general�benefit�of�these�companies.�To�the�extend�imports�are�concerned�for�a�country�such�as�India�as�imports�are�vital.

OBJECTIVE�AND�SCOPE�OF�STUDY

1.�The�primary�Objective�of�this�study�is�to�comprehend�the�idea�of�currency�variance

2.�Tocomprehend�the�causes�for�declines�of�the�rupee�against�dollar.�

3.�To�study�the�implications�of�the�falling�of�the�rupee�on�the�Indian�economy�

4.�To�understand�the�stringent�measures�by�Indian�government�to�make�rupee�stronger.

RESEARCH�METHODOLOGY:This�data�was�extracted�from�secondary�source�such�as�websites�of�different�leading�newspapers,�magazines�and�published�papers.

REVIEW�OF�LITERATUREKanika�Arora� (2014)� studied� the� real� implications�of� the�depreciation�of� the� rupee�on� the�Indian�economy�and�shows�that�in�the�long�run,�the�Indian�economy�has�more�to�lose�and�less�to�gain�with�weaker�rupee.�The�study�concluded�that�the�Indian�Rupee�has�depreciated�significantly�against�the�USD�marking�a�new�risk�for�Indian�economy.��Grim�global�economic��outlook��along��with��high��inflation,��widening��current��account��deficit� �and��FII�outflows�have�contributed�to�this�fall.�RBI�has�responded�with�timely�interventions�by�selling�dollars��intermittently.�But� in�times�of�global�uncertainty,� investors�prefer�USD�as�a�safe�haven.�To�attract�investments,�RBI�can�ease�capital�controls�by�increasing�the�FII�limit�on�investment�in�government� and� corporate� debt� instruments� and� introduce� � higher� ceilings� in� ECB's.�Government� can� create� a� stable� political� and� economic� environment.� However,� a� lot�depends�on�the�Global�economic�outlook�and�the�future�of�Eurozone�which�will�determine�the�future�of�INR.

THE�REASONS�FOR�THE�FALLING�OF�THE�INDIAN�RUPEE�AGAINST�THE�DOLLAR�PRESENTLY�1.�Increase�in�the�cost�of�the�crude�oil:��Individuals�as�a�whole�realize�that�India�produces�just�20%�crude�oil�of�her�necessity�and� rest� is� imported� from�alternate�nations� like� Iraq,�Saudi�Arabia,� Iran�and�other�gulf�nations.�Crude�oil� is�the�greatest�supporter� in�the�import�bill�of�India.�As�indicated�by�a�January�report�from�research�and�consultancy�firm�Wood�Mackenzie;�The�day�by�day�fuel�request�of�India�is�relied�upon�to�dramatically�increase�to�190,000�barrels�in�2018,�up�from�a�year�ago's�93,000�barrels.As�the�demand�of�the�crude�oil�is�rising�the�bill�of�oil�import�is�also�rising.�Information�published�by�the�Petroleum�Planning�and�Analysis�Cell�(PPAC)�focuses�that�India's�complete�crude�oil��import�bill�in�the�current�financial�year�(2018-2019)�is�expected�to�jump�24%�to�$109�billion�from�$88�billion�last�financial�year.�

2.�Start�of�Trade�war�between�the�USA�and�China:�The�US�President�Donald�Trump�has�started�the� Trade�war�with� China� and� European� nations� and� India� and� these� nations� additionally�retaliated�similarly.�So�because�of�this�war�the�cost�of�the�imported�commodities�will�go�high�which�will�additionally�increase�the�outflow�of�dollar�from�the�Indian�market.�

3.�Rise�in�Trade�Deficit�of�India�2018:�Its�straightforward�mean�is;�outflow�of�foreign�currency�is� more� from� Indian� market� when� contrasted� with� inflow� of� foreign� currency.� � when�increasingly�foreign�currency�that�is�dollar�goes�out�of�Indian�market,�its���domestic�cost�goes�high�and�the�cost�of�Indian�rupee�diminishes.�

4.�Out�Flow�of�Foreign�Currency:��capital�Outflow�from�India�2017-18Foreign�Portfolio�Investors�(FPIs)�have�hauled�out�almost�Rs.�48,000�Crore�from�Indian�capital�markets�in�the�initial�a�half�year�of�2018,�making�it�the�quickest�outflow�in�decade.�FPIs�pulled�back�a�net�whole�of�Rs.�6,430�crore�from�equities�other�than�Rs.�41,433�crore�from�the�debt�markets�amid�January-June�time�of�the�year,�taking�the�total�flow�to�Rs�47,836�crore.�

IMPACT�OF�FALLING�RUPEE�ON�INDIAN�ECONOMY� Imports� from� other� countries� will� become� costly� and� exporters� will� get� more� rupees�for�the�goods�they�export.�With�this�circumstance,�we�expect�that�imports�will�diminish�and�exports�will� rise�which� supports�our�economy.� In� reality� the�consistent� falling�of� rupee� is�stressing�importers,�and�also�in�this�way�they�are�purchasing�excessive�stock�ahead�of�time�to�avoid�from�paying�more�expensive�rate�in�the�coming�days.�This�is�causing�more�demand�for�dollar.�

Ø� Numerous� exporters� are� deferring� exports� to� get� more� benefit� as� the� estimation� of�rupee�is�ceaselessly�falling.�This�is�increasing�trade�deficit�(Imports�‒�Exports),�which�inturn�builds�Current�Account�Deficit�(CAD).

� Traders� will� like� to� export� goods� as� opposed� to� moving� them� in� domestic� markets.� This� will�expand�the�costs�in�local�markets.�Alongside�that�as�imports�are�costlier,�imported�goods�will�end�up�costly,�because�of�this�whole�procedure,�inflation�happens.�At�the�point�when�inflation�is�excessively�high,�sales�will�be�dropped�influencing�nation's�economy.�

�Rise�in�inflation�will�decrease�reserve�funds�from�individuals.�This�will�adversely�impacts�nation's�economy�since�savings�and�investments�are�essential�for�economic�development.�

��Reimbursing�foreign�debts�will�turn�out�to�be�considerably�more�costly.�This�will�build�burden�on�Indian�economy.�

Ø Falling�rupee�increases�pressure�on�Foreign�exchange�reserves�

� Powerless� and� fluctuating� money� will� debilitate� foreign� investors� from� investing�resources�into�the�nation.�In�this�manner�Foreign�Direct�Investment�(FDI)�inflows�to�India�will�back�off.�Some�investors�will�sell�off�their�holdings�in�India�causing�capital�outflows.�This�will�additionally�lessen�the�demand�for�rupee.

CONCLUSIONThe�fall�in�the�value�of�currency�affects�a�lot�of�economic�growth�indicators.�Falling�of�rupee�reduces�the��inflow�of��foreign�capital,�rise�in�the�external�debt�pressure�etc.After�significant�expansion�in�the�exports�and�sales�in�this�year,�Indian�companies�are�reporting�huge�foreign�exchange�losses�due�to�the� falling�of� Indian� rupee.�The�condition�which�has�been�made� for� the�economy�because�of� the�falling�of�rupee�against�dollar�uncovers�that�there�has�been�a�huge�negative�effect�of�this�currency�unpredictability�on�numerous�areas.

REFERENCE:

https://www.business-standard.com/article/pf/how-does-a-falling-rupee-affect-you-115051800011_1.html

http://www.groupdiscussionideas.com/impact-of-falling-rupee-on-indian-economy/

https://www.jagranjosh.com/general-knowledge/why-rupee-is-falling-against-dollar-1530858596-1

https://www.researchgate.net/publication/282440021_RUPEE_DEPRECIATION_AND_ITS_IMPACT_ON_INDIAN_ECONOMY

https://www.researchgate.net/publication/309488226_Impact_of_Rupee-Dollar_Fluctuations_on_Indian_Economy

https://www.investopedia.com

FALLINGRUPEEVALUEANDITSIMPACTONHOUSEHOLDSECTOR

DR. Niloofar Mirza . M.A. NET Ph.D.Assistant�ProfessorBET�SADATHUNNISA�DEGREE�COLLEGE,:�[email protected]

ABSTRACTThe�depreciation�in�the�value�of�rupee�when�clubbed�with�inflation,�cripples�the�domestic�economy�of�the�country.�The�falling�of�rupee�against�the�US�dollar�has�made�rupee�as�the�worst�performing�asian�currency.�First�and� the�most�visible�effects�of� this� is,� the� imports�become�expensive�and�exports�cheaper.�By�this�commodity�prices�will�be�high�and�it�will�directly�hit�the�common�man's�pocket.�Secondly,�it�will�be�a�costlier�for�the�Indian�students�studying�abroad�as�they�buying�dollar� in� Indian�rupees�to�pay�their�fees.�Thirdly,� job�and�remuneration� will� get� effected� and� unfortunately� we� are� already� � suffering� from�unemployment.�Fourthly,�foreign�vacations�are�now�costlier�and�people�are�opting�for�non�dollar�destinations.�It�has�impacted�the�automobile�sector�as�well.�The�companies�are�using�imported� components� which� are� costlier.� At� the� same� time� buying� homes� are� costlier�because�the�raw�materials�used�by�builders,�construction�and�transportation�costs�all�get�influenced� by� falling� of� rupee.� Depreciating� rupee� has� a� significant� impact� on�entertainment�too�such�as�buying�laptops,�mobile�phones�and�televisions.�There�are�both�positive�as�well�as�negative�aspects�but�the�thing�is�we�should�focus�on�simple�things�i.e.�create�infrastructure�and�promote�inclusive�growth.

KEYWORDS�:�depreciation,�inflation,�cripples,�remuneration,�inclusive

INTRODUCTIONThe�depreciation�in�the�value�of�rupee�at�the�international�level�is�cancerous�for�domestic�Indian�economy�because�a�weak�currency�is�one�whose�worth�has�decreased�in�value�in�comparison� to�other� currencies.� It� can�be�due� to� rise� in�oil�prices,� changes� in�economic�policies�for� foreign�countries,� internal�conflicts�within�the�supplier�nations,�etc.�But,�this�depreciation�of�rupee,�when�clubbed�with�inflation,�cripples�the�domestic�economy.�Since�the� beginning� of� 2018� rupee's� value� has� eroded� by� 12%� against� the� US� dollar�making�rupee�as� the�worst�performing�asian� currency� and� can� lead� to� economic� turmoil� in� the�

COSTLIER�IMPORTS�-�COMMODITY�PRICES�WILL�BE�HIGHHigh�inflation�has�been�pinching�you�for�more�than�a�year�now.�Now,�the�weakening�rupee�has� made� crude� oil,� fertilisers,� medicines� and� iron� ore,� which� India� imports� in� large�quantities,� more� costlier.� Though� these� items� are� not� for� your� daily� consumption,� they�impact�your�finances�indirectly.�For�instance,�since�India�depends�on�imports�for�a�large�part�of�crude�oil� it�consumes,�a�weak�rupee�will� influence�petrol�and�diesel�prices.Fuel�is�being�directly�connected�with�the�cost�of�transportation�and�prices�of�goods�that�are�transported�from�one�part�of� the�country� to�another.�This�will�have�a�direct� impact�on� the�household�budget.� Apart� from� this� fast� moving� consumer� goods,� such� as� soaps,� detergents,�deodorants� and� shampoos,� of� which� crude� oil� is� an� input,� are� likely� to� become� more�expensive.�Higher�cost�of�imported�raw�materials�added�to�their�woes.�The�companies�will�have�to�revise�prices.�Hindustan�Unilever�and�Procter�&�Gamble�have�already�taken�steps�in�this�direction.�Many�others�will�increase�prices�in�the�coming�months.Pulses�and�oil,�which�account�for�a�large�part�of�India's�imports,�will�also�be�affected.�Crude�palm�oil�is�imported�in�large� quantities� and� any� rise� in� its� price� will� add� to� the� inflationary� pressure.The�depreciation�of�the�rupee�has�considerably�affected�the�price�of�the�edible�oil�complex�in�a�big�way,�as�we�import�60-70%�of�our�requirement.�

COSTLIER�FOR�OVERSEAS�STUDENTS�AS�THEY�BUY�DOLLAR�TO�PAY�THEIR�FEESWith�the�weakening�of�the�rupee,�the�burden�has�increased.�Whether�it�is�the�rent�of�a�room�or� the�meal,both� are� costly.Monthly� budget� has� risen� and� it� will� be� difficult� to� bear� the�expenses�if�the�trend�continues.Students�who�have�taken�loans�to�fund�their�foreign�degree�are�also�bearing�the�brunt.�Education�loans�are�usually�in�rupees,�but�as�students�pay�their�expenses�in�a�foreign�currency,�the�cost�of�education�and�stay�has�increased.�The�cost�is�in�a�

country.�As� India�meets�80%�of�energy�needs�through� imports,�weak�rupee�will� translate�into� higher� inflation� and� this� higher� inflation� will� be� detrimental� to� the� growth� of� the�country.One�of�the�first�visible�effects�of�currency�depreciation�is�that�the�imports�become�more�expensive�and�exports�cheaper.�In�addition�to�this�it�also�influence�the�oil�import�bill�since�it�costs�more�rupees�per�barrel�of�oil,�which�plays�its�own�part�in�pushing�inflation�up.�Costlier� inputs� increasethe� prices� of� finished� goods� and� at� the� same� time� decrease� in�demand�due� to�higher�prices.A�depreciating� rupee�will� certainly� affects� the� reduction� in�household� consumption� because� of� higher� prices� of� goods� and� services,� costlier� petrol�and�trips�abroad�turning�more�expensive.�For�the�common�man,�the�falling�rupee�is�going�to�hit�where�it�hurts�the�most�i.e.�the�pocket.�From�essentials�such�as�food�and�education�to�foreign�vacation�and�the�swanky�gadget�you�plan�to�buy,�the�falling�rupee�will�hurt�you�in�more�ways� than� one.Demands� of� people�will� be� less� and� traveling� abroad�will� be�more�expensive.� Widening� of� the� Fiscal� Deficit� wheregovernment� will� have� to� pay� a� higher�amount�(in�rupees),�to�repay�its�debt�(in�dollars)�and�less�foreign�investment�in�the�country.

JOBS�AND�REMUNERATIONEvery� industry� which� is� dependent� on� imports� will� have� to� face� an� increase� in� cost� of�production�and�operations.�In�jobs�either�the�lesser�number�of�people�will�be�hired�or�the�salary�bill�will�be�kept�constant�or�reduced.�However,�it�is�a�good�time�for�industries�which�earn�in�dollars.�

FOREIGN�VACATIONSThe�falling�rupee�is�bad�news�for�itinerant�Indians�and�vacationers�to�a�foreign�country.�Air�fares�are�going�up�due�to�an�increase�in�fuel�surcharge.�The�stay�will�be�costlier,�shopping�can� become� more� expensive� and� eating� out� will� also� be� costlier.� The� holiday� package�booked�in�advance�before�the�rupee�fell�will�not�be�effected�but�it�will�certainly�change�the�travel�plans�and�holidays�are�being�cut�short�as�well�as�non-dollar�destinations�such�as�Sri�Lanka,�Dubai,�Bangkok�will�be�preferred�and�people�may�also�prefer�or�stick�to�domestic�destinations�such�as�Kashmir,�Kerala�and�Goa.

BUYING�A�CARThe�depreciation�of�rupee�has�impacted�the�automobile�sector�in�three�ways:Input�costs�have�risen�as�these�companies�use�imported�components.�This�makes�the�price�of� the�car�high.�Some�companies�will�have�to�pay�higher�royalty�to� foreign�parent�firms.�Many� have� foreign� currency� loans� in� the� form� of� external� commercial� borrowings� and�foreign�currency�convertible�bonds.�Therefore,�more�or�less�all�automobile�companies�will�have� to� increase� prices.� Maruti,� Hyundai,� Honda� and� Ford� have� already� increased� their�prices�to�protect�margins.

BUYING�A�HOMEBuying�our�dream�home�will�also�become�a�dream.�Fluctuations�in�the�value�of�a�currency,�can�affect�the�real�estate�market�of�a�country�in�a�variety�of�ways�̶�from�impacting�the�cost�of�services�and�raw�materials�used� like�steel�and�cement,�to� labour�wages,�transportation�cost� and� subcontracting� of� architects,� engineers� and� builders.� The� falling� of� the� rupee�against� foreign�currencies,� is�usually�a�sign�of�weakening�economic�health.�A�weak�rupee�can� cause� escalations� in� the� budget� and� delays� in� the� time� frame� of� projects,� thereby,�impacting�buyers�and�builders�alike,�in�the�long�run.A�depreciating�rupee�could�also�force�the�RBI�to�hike�interest�ratesif�the�rupee�continues�to�weaken.�Higher�interest�rates�mean�that�loans�will�get�expensive.

foreign�currency�while�the�borrowing�is�in�rupees.�So,�the�students�may�fall�short�of�funds.�In�such�a�scenario,�either�the�student's�personal�contribution�will�have�to� increase�or�he�will�have�to�ask�the�bank�to�increase�the�loan�amount.�

ENTERTAINMENTThe� imported� paperback,� favourite� pizza� and� the� latest� laptop� will� also� become� more�expensive.�There�is�an�increase�in�the�cost�of�imported�books�as�well�as�the�cost�of�sourcing�them.�

Electronic� consumer� goods� such� as� computers,� televisions,� mobile� phones,� etc,� with�imported� components� will� also� become� costlier.� International� food� chains� which� run�outlets�in�India�are�not�denying�the�impact�on�profitability.�The�depreciating�rupee�has�had�a� significant� impact� on� our� capital� expenditure� as� we� import� a� lot� of� special� kitchen�equipment.�If�the�trend�continues,�we�will�be�forced�to�pass�on�some�burden�to�customers.

WHAT�DOES�THIS�MEANS�FOR�THE�CITIZENS1.�A�depreciating�rupee�means�higher�prices�of�goods�and�services,�costlier�petrol�and�trips�����abroad�turning�more�expensive.2.�On�the�flip�side,�the�domestic�tourism�could�grow�as�more�tourists�visit�India�since�their������currency�now�buys�more�here.3.�In�the�medium�term,�export-oriented�industries�may�also�create�more�jobs.

NEGATIVE�IMPACTS�OF�FALLING�RUPEE�VALUE:Our� imports�will� suffer.�As�we� import� fertilisers,�weapons�and�petroleum�products,� these�thingsprices�will�skyrocket.�Inflation�will�go�high.�It�will�be�more�harder�for�a�common�man�to�survive.It�takes�more�rupees�to�pay�for�the�same�quantum�of�imports�and�fewer�dollars�for�a�buyer� to�pay� for� the�same�quantity�of�exports.More�expensive� imports�are� likely� to�drive�inflation�upward,�especially�in�India�where�input�products�constitute�a�large�part�of�our� imports.Rise� in� exports�will� give� us�more� foreign�money�which�makes� our� economy�more� stable.Students� going� abroad� will� suffer� because� their� education� will� become�expensive.It�remains�to�be�seen�what�impact�a�reduction�in�household�consumption�would�have�on�demand,�especially�when�the�festive�season�is�on�as�one�dollar�is�equal�to�Rs�70.45�at�present.

POSITIVE�ASPECTS�OF�FALLING�RUPEE�VALUE:Export� industry� will� bloom� -� Foreigners� will� have� to� pay� less� dollars� for� same� product.�Creation�of�more�jobs�in�export�industry.�It�will�lead�to�less�unemployment.�A�weak�currency�may�help�a�country's�export�gain�market�share�when�its�goods�are�less�expensive�compared�to�goods�priced� in�stronger�currencies.�The� increase� in�sales�may�boost�economic�growth�and� jobs,�while� increasing�profits� for� companies� conducting�business� in� foreign�markets.�Growth� of� tourism� sector�where� the� people�will� prefer� to� come� to� India.� It� is� one� of� the�important�resources�of�income�generation�if�it�is�properly�planned.

CONCLUSIONThese�are� the�overall� impacts�of�depreciating� rupee.�The�government�and�RBI�are� taking�short�term�measures�to�improve�the�situation.�Nations�and�governments�should�realise�that�depreciation� and� appreciation� are� phenomena� created� by� the� immense� interconnected�ecology�of�the�global�free�market.�And�thus,�should�stick�to�the�policies�that�do�the�simple�thing:�create�infrastructure�and�promote�inclusive�growth.

References�Books:�K�R�Gupta,�Interest�Rates�and�Inflation�in�India,�Issues�and�Concerns,�Edition�2012Aparna�Bhardwaj�and�Rajesh�Kumar,�Inflationary�Trends�in�India,�ISBN�9788184841091,�Edition�2011

Journals:South�Asian�Journal�of�Macroeconomics�and�Public�Finance,�ISSN�23210273,�Volume�1,�Issue�1,�April�2018Internet�and�Newspaper�

FALLINTHERUPEEVALUE:CAUSESANDITSIMPACTONINDIANECONOMY

S.C.Vijaya ShreeAssociate�Professor

�Department�of�Economics.Maharani�Womenʼs�Arts�Commerce�&�Management�College,�

Seshadri�Road,�Bangalore��������������������������Ph.D,�Research�Scholar,�(Part�Time),�

Department�of�Economics�Periyar�University,�Salem�636�011

Dr.A.SaravanaduraiAssociate�Professor,�Department�of�Economics,Periyar�University,�Salem�636�011

ABSTRACTRupee� depreciation� has� been� the� hot� subject� in� current� economic� scenario.� We� are�experiencing�a� tough� time�with� rupee�depreciation�every�day.�Current�economic�context�

stcreated�anxious�moments�to�various�industrial�sectors�in�India.�On�1 �Dec,�2013�the�value�of�Indian� rupee� stood� at� 62.44.� The� experts� in� the� field� perceived� the� situation� in� different�manners.� Some� considered� it� as� highly� depressed� and� threatening� environment;� some�others�considered�it�as�an�opportunity�in�disguise.�There�are�various�positive�and�negative�impacts�which�are�being�predicted�by�experts�in�the�fields.�Rupee�depreciation,�no�doubt�it�will�affect�upper�and�lower�sectors�of�the�economy.�This�spectacular�decline�of�rupee�value�will�loss�India's�confidence�in�its�growth�prospect�too.�RBI�and�government�is�taking�various�measures�with� the� objective� of�making� a� stabilized� floor� for� Indian� rupee.�Mr.� Raguram�Rajan,�RBI�Governor,�has�shown�reflections�of�hope�in�the�present�crisis.�This�paper�tries�to�explore�the�causes�and�impact�of�rupee�depreciation�on�the�Indian�economy�and�also�tries�to�review�various�measures�taken�by�RBI�and�Government�to�get�over�the�present�crisis.

INTRODUCTIONIndia� got� freedom� from� British� rule� on� Aug� 15,� 1947.� At� that� time� the� Indian� rupee�was�linked�to�the�British�pound�and�its�value�was�at�par�with�the�American�dollar.�There�was�no�foreign�borrowing�on�India's�balance�sheet.�To�finance�welfare�and�development�activities,�especially� with� the� introduction� of� the� five-year� plan� in� 1951,� the� government� started�external� borrowings.� This� required� the� devaluation� of� the� rupee.-� after� independence,�Indian�choose�to�adopt�a�fixed�rate�currency�regime.�The�rupee�was�pegged�at�4.79�against�a�dollar�between�1948�and�1966.�India�faced�a�serious�balance�of�payment�crisis�in�1991�and�was�forced�to�sharply�devalue�its�currency.�The�country�was�in�the�grip�of�high�inflation,�low�growth� and� the� foreign� reserves� were� not� even� worth� to� meet� three� weeks� of� imports.�Under�this�situation,�the�currency�was�devalued�to�17.90�against�a�dollar.

Recently� every� Indian� economic� and�political� discussions� toss� around� the� subject� of� the�upsetting�news�of� rupee�depreciation�and� its� effects,�both� long� term�and� short� term�on�Indian�economic�context.�Indian�rupee�has�experienced�considerable�depreciation�of�value�

Another�major� reason� is� the� release�of�October�Federal�Open�Market�Committee� (FOMC)�minutes,�in�which�the�policy�holders�were�considering�to�cutting�off�its�stimulus�program�in�the�coming�months.�The�international�Financial�Corporation�(IFC),�a�member�of�the�World�Bank�group�on�20th�Wednesday�issued�Rs.1000Crore�(around$160�Million)�to�Global�Indian�

ndrupee� bond� to� strengthen� the� country's� capital�market.� On�Nov� 22 � Friday� the� 10-� year�bench�mark�government�bond�yield� inched�up�and�ended�at�8.99�compared� to�previous�close�8.85%.�Many�experts�had�pointed�out�various�reasons�for�the�currency�depreciation.�

The� Indian� rupee� is� under�great� stress� as�overseas� investors� are�paring� their� exposure� to�Asia's�Third� -� largest�economy�amid� international�uncertainty�and�mounting�worries�over�the��domestic�economy.�The�exchange�rate�between�the�Indian�Rupee�and�the�US�Dollar�has�gone� over� the� roof.� Historically,� from� 1973� until� 2011� the� USD/� INR� exchange� averaged�30.32�reaching�an�historical�high�of�52.84�in�December�of�2011�and�a�record�low�of�7.19�in�March�of�1973.�Over�the�past�two�year,�the�rupee�has�consistently�depreciated�against�the�dollar.�The�year��2012�has�begun�with�catastrophic�affect�for�the�rupee.�It�was�Rupees�43.96�against�a�dollar�in�the��July�2011�and�now�for�$1�it�is�Rupees�54.3.�Rupee�hits�all�time�low�in�January�2012.�

The�rupee�has�lost�more�than�10�percent�of� its�value�this�year,�making�it�one�of�the�worst�performing�currencies� in�Asia.� This� kind�of�decline�will�have� the� sweeping� impact�on� the�macro�economy�of�the�country,�as�we�are�heavily�dependent�on�the�import�of�oil,�food�items�and�other�crucial�raw�materials.�India�may�face�its�worst�financial�crisis�in�decades�if�it�fails�to�stem�a�slide�in�the�rupee,�leaving�the�central�bank�with�a�difficult�choice�over�how�to�make�the� best� use� of� its� limited� reserves� to�maintain� the� confidence� of� foreign� investors.� This�paper�reviews�the�probable�reasons�for�this�depreciation�of�the�rupee�and�the�outlook�for�the�same.�

in�recent�times�and�that�has�affected�even�the�bottom�lines�of�Indian�economic�scenario.�Currency�depreciation,�as� the�name�suggests� refers� to� fall� in�value�of�one�currency�with�respect� to� another.� That� is� one� US� dollar� can� buy� 45� INR� today,� and� can� buy� 60� INR�tomorrow.�INR�would�have�depreciated�by�33percent.�The�value�of�rupee�had�weakened�about�16%�this�financial�year.�Since�the�start�of�the�month�November�2013,�it�has�fall�on�2.3%.�The�rupee�had�weakened�to�around�63�on�Thursday�Nov�21st�after�the�minutes�from�the� US� Federal� Reserve's� October� meeting.� In� the� meeting� they� decided� to� cut� off� its�stimulus�program� in� the� coming�months.�On�Sunday,� 1st�Dec�2013,� the� rupee�ended�at�62.44.�The�economic�affairs�secretary�Aravind�Mayram�suggested�that�the�main�reason�for�the�rupee�fall�is�due�to�the�demand�for�dollar�by�the�state�run�oil�companies.�

Objectives�of�this�studyTo�Examine�the�Causes�of�Currency�Depreciation�in�Economy�To�analyses�the�impact�of�Currency�Depreciation�in�Economy

Result�and�DiscussionCauses�of�Currency�DepreciationAs�the� Indian�currency� is�sharply�depreciated�against�dollar,�as�well�as�against�other�world�currencies,�it�is�imperative�to�understand�the�factors�contributing�its�fall�in�the�global�market.�Some�of�the�major�factors�of�currency�depreciation�are�discussed�below.

Demand�and�Supply�RuleDemand�and�supply�rule�means�if�there�is�more�demand�of�dollars�in�the�currency�market�and� is� not� adequately�matched� by� the� supply,� other� things� remaining� equal,� the� rupee�price�of�dollar�will�go�up�or�the�rupee�will�depreciate.�Demand�for�dollars�may�be�created�by�importers� requiring�more� dollars� to� pay� for� their� imports,� foreign� institutional� investors�withdrawing� their� investments,� and� taking�dollars� outside� India,� etc.�On� the�other� hand,�supply�is�created�by�exporters�bringing�in�more�dollars�from�their�revenues,�NRI'S�remitting�more�funds,�FII's�bringing�more�dollar�in�India�to�spur�their�investments.

Improving�the�Strength�of�US�EconomyImproving� the� strength� of� the� US� economy� or� dollar� gaining� strength� against� other�currencies�is�considered�as�another�reason�for�the�crisis.�That�is�Reserve�Banks�of�Euro�zone�and�Japan�printing�excessive�money�due�to�which�their�currency�is�being�devalued.�On�the�other�hand,�US�Fed�has�shown�signs�to�end�their�stimulus.�(Stimulus�is�a�plan�by�central�bank�to�counter�a�weak�economy,�by�taking�various�actions�like�lowering�interest�rates,�increase�govt.�spending,�and�quantitative�easing�etc.)�This�side�effect�includes�weakening�currency.�Hence�helps�to�make�US�Dollar�stronger�against�other�currencies.

Increased�Price�of�OilIncreased�prices�and�demand�for�Oil�is�another�reason�for�rupee�fall.�India�has�to�import�Bulk�of� its� oil� requirements� to� satisfy� its� local� demand� which� is� increasing� every� year.� The�domestic�demand� for�oil� is� increasing�which�causes� the�price�of� the�oil� to� increase� in� the�international�market.�The�demand�for�dollar�increases�as�we�have�to�make�payments�to�our�suppliers�in�dollars.�This�increase�in�demand�for�dollar�weakens�the�rupee.�55%�of�the�India's�oil�import�is�used�for�Transportation�of�goods�and�people�and�50%of�that�or�27%�of�the�total�is� used� for� transporting� the� 1.8� Indians� who� owns� cars.� Indian� crude� oil� imports� during�October,� 2013� is� valued� at� US� $� 15217.6� million� which� was� 1.7� percent� higher� than� oil�imports�valued�at�US�$�14957.7�million�in�the�corresponding�period�last�year.�Oil�import�in�India�is�stood�at�169319.3�US�$�million�in�the�current�financial�year�2012-2013.

Wider�Current�Account�Deficit�(CAD)�can�be�regarded�as�another�reason�for�currency�fall.�A�current�account�deficit�occurs�when�a�country�is� importing�more�goods�and�services�than�that�is�exporting.�India's�current�account�deficit�has�exploded�1125%�since�2007�going�from�$8billion� to$� 90� billion.� In� other� words� India� is� importing� $� 90� billion� more� than� it� is�exporting.�India�had�a�deficit�on�its�current�account�nearly�$90billion�which�is�5%�of�GDP�in�the� year� 2012-2013.� This�wider� current� account�deficit� usually� creates�demand� for�dollar�which�may�result�in�rupee�depreciation.�The�deficit�can�be�bridged�either�by�using�country's�forex�reserves�or�from�capital�inflows.�The�CAD�has�touched�a�record�high�of�5.4%�of�GDP�in�July� ‒Sept�quarter� of� this� year.� India's� current� account�gap�narrowed� sharply� to�USD�5.2�billion,� or� 1.2� per� cent� of�GDP,� in� the� July-September� quarter� of� 2013-14� on� the� back� of�turnaround�in�exports�and�decline�in�gold�imports.

Low�Forex�ReserveLow�forex�reserve� is�another�reason�for�currency�depreciation.� India's� forex�reserves�have�declined� in� recent�months.� In� the� year� 2007� India� had� $300� billion� in� foreign� exchange�reserves.�It�could�cover�its�current�account�deficit�37.5�times�over.�Currently�India's�foreign�exchange� reserves�have�gone�down� to�$275�billion;� it� can� cover�only� its� current�account�deficit�3�times.�India's�forex�reserves�are�sufficient�only�to�cover�imports�of�7�months.�India's�forex�reserve�down�by�$�17.23�billion�y-o-y�and�as�on�Sept�6�it�stood�at�$274.81billion.

Lower�growthLower�growth� is�another� reason� for�currency�depreciation.�That� is�due� to� the� low�growth�foreign� institutional� investors�were�pulling�off�money�from�India.� India's�GDP�growth�rate�dropped�to�4.4%�for�the�first�quarter�of�the�financial�year�which�was�much�lower�compared�to�4.8�%�in�the�previous�year.�In�the�first�quarter�of�2012-2013,�the�growth�was�5.4%.�At�the�end�of�2011�real�growth�rate�of�GDP�was�approximately�7.8%.�In�2010�it�was�almost�10.1%.�In�2009� it�was�close� to�6.8%.�The�Per� capita� (PPP)�GDP�of� India� is�approximately�3700�US�Dollars�which�places�India�in�the�163rd�position�from�the�Global�perspective.�In�2010�the�per�capita�GDP�of�India�stood�at�almost�a�$3800.�In�the�previous�year�it�was�stood�at�$�3200.�The�overall�GDP�growth�in�India�has�slow�down�from�8.4%�in�FY�2011�to�6.5�in�fy-2012.�Lower�GDP�with�high� inflation,� record�high�CAD�and� record�high� Indian� rupee�depreciation�will�further�worsen�the�India's�Macroeconomic�condition.

Impact�of�Rupee�Depreciation�on�Indian�EconomyStrong� demand� of� US� currency� from� importers� and� banks,� continuous� capital� outflows,�widening� current� account� deficit� and� dollar� strength� against� other� currencies� overseas�amid�expectation�that�the�federal�reserve�will�soon�tapper�its�bond�buying�program�has�put�pressure�on�the�rupee.�Whether�the�currency�would�find�its�stable�level�or�will�continue�to�

Wider�Current�Account�Deficit

slide� further� remains� a� tricky� question.� Let� us� have� a� look� at� how�depreciation� of� rupee�affects�Indian�economy.�The�currency�depreciation�will�benefit�the�export�oriented�sectors�such�as�IT�sector,�textile,�pharmaceuticals,�gems�and�jewelers,�power�and�fertilizers.�That�is,�a�weak�rupee�will�make�Indian�produce�more�competitive� in�global�markets�which�will�be�fruitful�for�India's�exports.�

The� depreciating� rupee� will� bring� delight� to� the� exporters� as� goods� exported� abroad�will�fetch�dollars�which�in�return�will�translate�into�more�rupees.�A�sharply�declining�rupee�triggers�inflation,�broaden�the�current�account�deficit,�hits�investor�sentiment�and�creates�burden�for�the�organization�with�high�exposure�to�foreign�debt.

Buying� import� materials� become� very� costly.� Crude,� which� is� priced� in� dollars,� is�India's� biggest� import� item� and� depreciating� rupee� increases� the� cost� of� imports.� The�companies�depending�on�imported�raw�materials�will�see�a�sharp�impact�on�their�bottom�line.�A�weak�rupee�also�exposes�companies�with�unhedged�overseas�loans.�A�weak�rupee�will�create�extra�stress�on�oil�marketing�companies�(OMC)�and�this�will�surely�be�passed�on�the� consumers� as� the� companies� allowed�doing� so� after� the�deregulation�of� petrol� and�partial� deregulation� of� diesel.� If� OMC� increases� fuel� prices,� there� will� be� a� substantial�increase�in�overall�cost�of�production�which�will�trigger�inflation.

Travelling� abroad� will� be� costlier� as� Indians� will� have� to� pay� more� Rupees� to� buy�Dollars�for�overseas�trips.�Those�who�plan�to�go�for�US�for�foreign�education�have�to�spend�more� amounts� due� to� the� sharp� fall� in� rupee.� Then�with� the� every� single� fall� of� rupee� a�burden�of�9000�cores�is�created�on�the�govt.�in�the�form�of�subsidy.�This�has�caused�fiscal�deficit� to� increase.�At�the� industry� level� the�cost�of�borrowing�has�been� increased�for�the�companies�which�have�taken�foreign�loans.�The�increased�liability�has�burdened�companies�which�now�resort�to�retrenchment�to�cut�down�expenditure.�This�has�led�to�unemployment�in�the�economy.

The� continuous� depreciation� in� rupee� will� increase� inflation� of� the� country.� In� such�situation�RBI�will�have�very�less�room�to�cut�policy�rates.�No�cut�in�policy�rate�will�add�to�the�borrower's�woes�that�are�eagerly�waiting�to�get�rid�of�high�loan�regime.�The�adverse�effects�of�rupee�depreciation�are�likely�to�be�offset�by�gains�in�export�performance,�according�to�a�latest�India�development�report�released�by�the�World�Bank�in�New�Delhi�on�Oct�16,�2013.�The� report� says� that�although�export�did�not� respond�to� the� rupee�depreciation� in� June,�export� performance� recovered� strongly� in� July� and� August.� During� two� months,�merchandise�exports�grew�at�an�18�month�high�of�12.3�percent�year�on�year.�According�to�Martin�Rama,� chief� economist� for� the� south�Asia� region,� it� is� an�opportunity� for� India.�A�bumper�agriculture�output�is�expected�which�will�have�a�positive�impact�on�GDP�growth,�according�to�the�report,�till�Sep�2013,�India�had�been�5%�higher�rainfall�than�normal.�This�

The� Govt.� also� plans� to� increase� the� cap� of� FDI� in� various� sectors� like� insurance� and�retail�to�attract�foreign�investors.�The�conditions�which�were�imposed�on�wall�mart�to�enter�to�India�have�now�been�withdrawn�by�the�Government.�Then�as�soon�as�wallmart�enter�into�India� it� will� bring� directly� the� required� FDI.� Central� bank� restricted� bank's� borrowings�through�liquidity�adjustment�facility�(LAF)�to�the�tune�of�1%�of�the�total�deposits�or�Rs�75000�crore.�RBI� raised� interest� rate�of�Marginal� standing� facility� (MSF)�BY�100�bps� to�10.25%�as�against9.25�%�currently.RBI�increased�bond�yield�to�m7.35%.�The�10-year�(2023)�bond�yield�is�moving�around�7.50-7.60%.�The�Government�also�plans� to� take� some�hard�decisions� to�trim�wasteful�expenditure�and�curb�the�import�of�nonessential� items�to�deal�with�stressed�economic� situations.� Thus� a� proper� system� should� be� implemented� by� the� ministry� and�should�keep�check�on�it.�The�currency�depreciation�should�be�systematically�tackled�by�the�Government�or�else�it�will�soon�cause�Indian�economy�to�breakdown.

ConclusionThe� currency� depreciation� is� extremely� worrying� all� because� of� the� devastating�impact�it�will�have�on�India's�economic�fundamentals�that�have�been�pushed�to�the�brink�by�global� factors.� The� Government� should� make� available� the� bonds� to� the� non� residential�investors�which�will�also�increase�the�inflow�of�Dollars�in�to�the�country.�In�order�to�overcome�this�crisis,�govt.�should�take�steps�to�boost�export�intensive�sectors�and�also�try�to�develop�import�substituting� industry�which�helps� India� to� less�dependent�on� imports.�More�export�incentive�should�be�provided�to�boost�export�trade�in�the�country.�Another�thing�to�control�currency� depreciation� is� to� formulate� policies� and� restrictions� on� gold� import� to� reduce�domestic�demand�for�gold.�RBI�Should�sell� forex�reserves�and�buy�rupees� in�an� immediate�actions� in� order� to� arrest� the� further� decline� in� the� value� of� rupees.� RBI� should� hike� the�interest�rates�in�order�to�reduce�supply�of�money�in�the�economy.�They�should�attract�more�foreign�institutional�investors�to�the�country.

Reference1.��Alessandro�Nicita,�UNCTAD,�Geneva;�“Exchange�Rates,�International�Trade�and�Trade�Policies”;������Policy�issues�in�international�trade�and�commodities�study�series�no.�5�2.��Huchet-Bourdon,�M.�and�J.�Korinek�(2011);�“To�What�Extent�Do�Exchange�Rates�and�their�Volatility�������Affect�Trade?”;�OECD�Trade�Policy�Papers,�No.�119�,OECD�Publishing�3.�Odusola�and�Akinlo�(2001);�“Output,�Inflation,�and�Exchange�Rate�in�Developing�Countries:�an�����Application�to�Nigeria”;�The�Developing�Economies,�Volume�39,�Issue�2,�pages�199‒222,�June�2001�4.�Steven�B.�Kamin�and�John�H.�Rogers;�“Output�and�the�Real�Exchange�Rate�in�Developing�Countries:������An�Application�to�Mexico”;�Board�of�Governors�of�the�Federal�Reserve�System�International������Finance�Discussion�Paper,�Paper�no.�580�

encouraged�farmers�to�increase�total�zone�area�by�5%�year�on�year�for�the�kharif�cropping�season.

5.�Steven�B.�Kamin�and�Marc�Klau;�“Some�Multi-Country�Evidence�on�the�Effects�of�Real�Exchange������Rates�on�Output”;�Board�of�Governors�of�the�Federal�Reserve�System,�International�Finance������Discussion�Papers,�Number�611,�May�1998�6.�Sumanjeet�Singh;�“Depreciation�of�the�Indian�Currency�Implications�for�the�Indian�Economy”;������World�Affairs�Year�:�2009,�Volume�:�13,�Issue�:�27.�www.zeenews.India.com/.../rupees-record-slid-brings-pain-andgain-for-India8.�www.iit.ac.in/me/mba-lltk/advant-grade/?p=12039.�'www.nationalturk.com/.../depreciation-ofIndian-rupee-can-affect-Indias10.�www.quora.com/Economy.....India/what-is-the-reason-behind-recentrupee-depre-inaugu-201311.�www.calclubIndia.com12.�www.omegagoons.com/devaluation-of-rupee-itscause-impactandremedy�http://www.dnaIndia.com

13.�www.ndtv.com/news/chat-sheet/article-rupee-crisis-top-tensteps-takentosupport-�currency-32642714.�www.profit/ndtv.com/news/economy/article-rbi-received-10billionunder-15.�forex-swap-window-370288

FALLINGRUPEEVALUEANDIT'SIMPACTONIMPORTS.

Nagaraju J. Research���Scholar�Tumkur�University�Tumakuru

ABSTRACTThis�paper�explores�the�falling�rupee�value�and�its�impact�on�imports.Weakrupeewill�hurt�firms�dependent�onimportsand� foreign�currency�borrowings.�The� rupee�has� fallen�more�than�7%�against�the�US�dollar�since�January.�...�Oil�imports,�amid�rising�crude�oil�prices,�are�leading� to� an� increased� demand� for� the� dollar� which,� in� turn,� is� making� the� rupee�weaker.The� circumstances� which� have� been� created� for� the� economy� due� to� the�depreciation�of�rupee�against�dollar�reveals�that�there�has�been�a�strong�and�significant�negative�impact�of�this�currency�volatility�on�many�sectors.�The�relationship�between�the�values�of�local�currencies�in�terms�of�foreign�currencies�and�export�competitiveness�of�any�country�is�very�complex.�This�relationship�will�become�more�complex�if�there�is�the�heavy�dependence� on� imported� resources� in� the� exported� products.� During� last� the� one� year�Indian�rupee�weakens�many�times�and�reached�to�a�level�of�68.510�for�a�dollar�in�February�2016.�Since� January�2015,� the� local� currency� lost�around�12�percent� to� the�US�currency.�Indian� economy� which� already� suffered� from� large� fiscal� and� current� account� deficit�adversely�affected�by�relatively�exchange�rate�pressure.�To�track�it�again�on�the�way�many�hard�decisions�were�taken�by�Indian�govt.�This�paper�presents�different�challenges�due�to�these� fluctuation� and� steps� triggered� by� the� central� bank� and� government� to� create�stability.

MEANINGA�downward�adjustment�of�the�price�of�a�currency�in�terms�of�other�currencies,�in�a�system�in�which� each� currency� has� a� gold� par� value.� The� downward� adjustment� may� be� achieved�through� a� devaluation� of� one� currency,� an� upward� revaluation� of� other� currencies,� or� a�combination�of�the�two.

INTRODUCTIONValue�of�any�currency�decreases�when�its�demand�decreases.�And�also�if�the�demand�for�US�dollar�increases,�rupee�along�with�many�other�currencies�weakens�against�USDImports�from�other�countries�will�become�expensive�&�exporters�will�get�more�rupees�for�the�goods�they�export.�With�this�situation,�we�expect�that� imports�will�decrease�and�exports�will� increase�which� boosts� our� economy.� But� in� reality,� continuous� depreciation� of� rupee� is�worryingimporters,�and� thereby� they� are� buying�more� stock� in� advance� to� avoid� paying�higher�price�in�the�coming�days.�This�is�causing�more�demand�for�dollar.Imports�from�other�countries�will�become�expensive�&�exporters�will�get�more�rupees�for�the�goods�they�export.�With� this� situation,�we� expect� that� imports�will� decrease�and� exports�will� increase�which�boosts�our�economy.�But�in�reality,�continuous�depreciation�of�rupee�is�worrying�importers,�andthereby� they� are� buying�more� stock� in� advance� to� avoid� paying� higher� price� in� the�coming� days.� This� is� causing� more� demand� for� dollar.Many� exporters� are� postponing�exports� to�get�more�profit�as� the�value�of� rupee� is� continuously�falling.�This� is� increasing�Trade� deficit� (Imports� ‒� Exports),� which� in� turn� increases� Current� Account� Deficit�(CAD).Traders�will�prefer�to�export�goods�rather�than�selling�them�in�domestic�markets.�This�will� increase� the� prices� in� domestic� markets.� Along� with� that� as� imports� are� costlier,�imported�goods�will�become�expensive?�As�a�result�of�this�entire�process,�inflation�occurs.�When� inflation� is� too� high,� sales� will� be� dropped� affecting� country's� economy.� Rise� in�inflation�will� reducesavings� from� people.� This�will� negatively� impacts� country's� economy�because�savings�and�investments�are�extremely�important�for�economic�growth.�Repaying�foreign� debts� willbecome� much� more� expensive.� This� will� increase� burden� on� Indian�economy.� Falling� rupee� increases� pressure� on� Foreign� exchange� reserves.� Weak� and�fluctuating�currency�willdiscourage�foreign�investors�from�investing�in�the�country.�Thereby�Foreign�Direct�Investment�(FDI)�inflows�to�India�will�slow�down.�Some�investors�will�sell�off�their� holdings� in� India� causing� capital� outflows.� This� will� further� reduce� the� demand� for�rupee.

The�objectives�of�falling�rupee�were1.��To�preserve�the�height�of�nominal�wage�rates�or�even�to�create�the�conditions�required�������for�their�further�increase,�while�real�wage�rates�should�rather�sink2.��To�make�commodity�prices,�especially�the�prices�of�farm�products,�rise�in�terms�of������domestic�money�or,�at�least,�to�check�their�further�drop3.��To�favor�the�debtors�at�the�expense�of�the�creditors4.��To�encourage�exports�and�to�reduce�imports5.��To�attract�more�foreign�tourists�and�to�make�it�more�expensive�(in�terms�of�domestic�������money)�for�the�country's�own�citizens�to�visit�foreign�countries

Devaluation�of�Indian�Rupee:�Reasons�and�History:

History�of�Indian�Rupee:�A�comparison�of�Indian�Rupee�Value�vs�US�dollar

Remember� that� we� were� following� a� fixed� rate�system�till�1975.�We�had�partial�controls�on�currency�market� till� 1993� when� as� per� IMF� standards� we�liberalized�our�entire�economy.

·�1947:�1�US$�=�1.00�INR�(Sounds�interesting,�huh?�:-)·�1948:�1�US$�=�4.79�INR.·�1965:�1�US$�=�4.79�INR.·�1966:�1�US$�=�7.57�INR.·�1971:�1�US$�=�8.39�INR.·�1985:�1�US$�=�12.0�INR.·�1991:�1�US$�=�17.9�INR.·�1993:�1�US$�=�31.7�INR.

·�2000:�1�US$�=�45.0�INR.·�2013:�1�US$�=�60.0�INR.·�2017:�1�US$�=�65.0�INR.·�2018:�1�US$�=�74.0�INR.

A�Weak�Indian�Rupee:�Advantages�&�Disadvantages:�Almost� a� year� ago,� Indian�National� Rupee� (INR)�witnessed� its�worst� time�where� its� value�slumped�to�the�record�low�nearing�69�per�dollar�in�August,�2013.�However,�gradually�things�improved�and�now�the�Rupee�value�is�currently�hovering�around�60�per�dollar.�

At�one�point�of�time,�for�instance�in�1991�when�Rupee�was�devalued,�any�fall�in�the�value�of�Rupee� was� never� appreciated� mostly� because� it� was� considered� to� be� the� blot� on� the�country's� prestige.�How�a� fall� in� the�value�of�national� currency� could�bring� cheers� to� the�nation?

Till� 1991,� India's� trade�engagement�with� the� rest�of�world�was�very� limited�and� India�was�considered�to�be�a�closed�economy.�With�little�contact�with�the�outside�world,�the�impact�of�devaluation�or�evaluation�of�currency�was�also�very�limited.�But�after�1991,�when�the�era�of�LPG� (Liberalization,�Privatization�and�Globalization)� started,�a�new�era�was�ushered�where�India�expanded�its�horizons�and�became�the�part�of�the�global�market.�System�of�exchange�rate� determination� was� also� changed� 1990s� when� fixed� exchange� rate� (determined� by�Reserve�Bank�of�India)�was�replaced�by�flexible�exchange�rate�system�(determined�by�market�forces).

As�India�embarked�on�market�economy,�grounds�for�analyzing�the�impact�of�change�in�Rupee�value�also�changed.�Now�it�is�analyzed�on�the�basis�of�its�practical�impacts�on�the�economy.

�Negative�impacts�of�Rupee�depreciation�over�an�economy�are§�Depreciation�strengthens�inflationary�forces.�When�the�inflation�rises,�prices�of�goods�and����commodities�shoots�up.�Therefore,�the�purchasing�power�of�the�rupee�falls�down.§�A�depreciation�of�the�domestic�currency�results�in�higher�import�costs�for�the�country.����Failure�of�a�similar�rise�being�experienced�in�the�prices�of�exportable�commodities�is�going����to�result�in�a�widening�of�current�account�deficit�(CAD)�of�the�country.§�Foreign�Travel�and�Overseas�Education�becomes�costlier.§�The�interest�burden�would�increase�on�foreign�currency�denominated�debt.§�A�large�and�rapid�devaluation�may�scare�off�international�investors.�It�makes����investors�less�willing�to�hold�government�debt�because�it�is�effectively�reducing�the�value����of�their�holdings.

However,�there�are�positives�of�the�depreciation�as�well�and�many�industries�cheer�the�depreciation§�Exports�become�cheaper,�more�competitive�to�foreign�buyers.�Therefore,�this�provides�a����boost�for�domestic�demand.§Travel�to�India�gets�cheaper;�local�industry�may�benefit.

The�ability�of�depreciation�to�affect�the�exports�and�imports�depends�upon�the�demand�elasticity�of�goods�and�services�exported�or�imported.�For�instance,�if�the�oil�imports�are�demand�inelastic�i.e.�price�of�oil�has�little�impact�on�its�import�demand,�depreciation�will�have�little�impact�on�current�account�deficit.�

Nevertheless,� there� are� some� other� benefits� of� depreciation� also� which� doesn't� accrue�directly.�Rupee�depreciation�raises�the�cost�of�components�and�goods�for�import-dependent�businesses.� It� puts� them�at� a�disadvantage�vis-à-vis� companies� that� are�net� exporters.� So�while� rupee� depreciation� seems� to� be� painful� in� the� short� term,� it�may� turn� out� to� be� a�blessing�in�disguise�for�the�Indian�manufacturing�sector�in�the�medium�to�long�term.

A�cheaper� rupee�will� incentivize� Indian�companies� to�export�more�besides�helping�them�substitute�some�of�the�costlier�imported�goods�in�the�domestic�market�with�local�products.�Thus,�despite�strengthening�the�ills�like�inflation,�Rupee�depreciation�has�its�positives�and�can�help�in�developing�the�manufacturing�base�of�the�economy.

IMPACT�ON�ECONOMY:There�are�many�losers�in�the�domestic�economy.�Importers�of�capital�goods,�raw�material,�intermediates� and� components� would� be� hit� hard.� India's� already� high� and� persistent�inflation� could� be� aggravated,� and� those� directly� or� indirectly� consuming� imported�products�varying�from�food�articles�to�petroleum�products�would�be�adversely�affected�by�rupee�price�increases.�Finally,�corporate�who�rushed�to�the�international�financial�market�to�borrow� funds� because� of� lower� interest� rates� abroad�must� be� counting� their� losses.� The�rupee's�depreciation�is,�therefore,�a�matter�for�concern.

ENCOURAGE�EXPORT�AND�DISCOURAGE�EXPORT:�Fall� in� the� value� of� rupee� makes� exports� cheaper� and� imports� expensive.� The� various�sectors� like� petroleum� and� petroleum� products,� engineering� goods� drugs� and�pharmaceuticals�‒�which�have�import�inputs�of�as�much�as�75-77�percent,�19-21�percent�and�17-19�percent�,�respectively�(As�per�report�of�Associated�Chambers�of�Commerce�and�Industry�of�India)�lead�to�a�strict�dent�on�their�income�due�to�fall�in�the�value�of�rupee.�The�reason�is�that�they�would�have�to�pay�more�for�the�imported�raw�materials�which�would�decrease� their� profit� margins.� On� other� hand,� the� falling� rupee� value� makes� Indian�domestic�goods�and�services�cheaper�for�foreign�buyers.�So,�it�may�increase�in�demand�of�Indian�goods�and�services.� It�may�lead�to�greater�revenue�generations.� Indian�industries�like� textiles,� IT,� hotels� and� tourism�can�generate� income�by�exporting� their�products�or�services�due�to�depreciating�rupee�and�they�can�increase�their�profit�margin.�The�foreign�

§�Those�working�abroad�can�gain�more�on�remitting�money�to�their�homeland.§�Ultimately,�it�assists�in�reducing�the�current�account�deficit.

IMPACT�ON�FOREIGN�INVESTORS:�When�foreign�investors�invest�in�Indian�stock�market,�they�make�a�loss�if�it�depreciates�and�may�earn�profit�if�rupee�appreciates.�Suppose,�a�foreign�investor�Invests�$4,�00,000�in�the�Indian�stock�market�and�at�an�exchange�rate�of�$1�=�Rs.�50.�So,�the�amount�invested�is�Rs�2�crore.� Suppose,� after� one� year,� even� if� the� value� of� investment� doesn't� appreciate� the�foreign� investor�can�earn�a�profit� if� the�exchange�rate�has�changed�to�$1�=�Rs.�55�(Rupee�depreciation).�If�the�investor�sells�his�investment�and�converts�the�currency,�he�would�get�$�3,�63,636.�So,�he�would�lose�$�36364�as�a�loss�due�rupee�depreciation.�So,�they�are�not�being�interested�in�Indian�economy�as�they�have�lost�their�confidence�due�to�it.

IMPACT�ON�IMPORTERS�AND�PRICES�OF�GOODS:�Fall�in�value�of�rupee�has�increased�their�payment�burden.�Dollar�price�of�-�impact�of�rupee�depreciation�on�Crude�oil�imports�suggests:�Crude�Oil�Price�has�declined�while�exchange�rate�was�depreciating.�Depreciation�of� currency,� domestic�price�of� crude�oil� has�become�more�costly.� The� importers� have-Expenditure� on�power� and� fuel� for� industry� has� increased� and�they�have�to�pay�an�additional�Rs.�489.8�per�barrel�to�import�the�same�quantity�of�Crude�Oil.

Table�1.3�states�that�the�global�prices�of�Crude�Oil�in�November�2011�were�lower�than�in�April�2011.�But,�the�importers�have�to�pay�an�additional�Rs.�489.8�per�barrel�to�import�the�same�quantity�of�Crude�Oil.

THE�IMPACT�OF�RUPEE�DEPRECIATION�ON�THERMAL�COAL�IMPORTS�SUGGESTS:Benefit� of� falling� commodity� prices� is� not� being� transferred� to� the� industry� due� Rupee�depreciation�coupled�with�inflexible�tariff-of�rupee�depreciation.�The�structure�means�that�the�power�companies�will�have�to�suffer�huge�losses.�Importer�has�to�pay�an�additional�Rs.�684.6�per�ton�to�import�the�same�quantity�of�coal.�Table�1.4�states�that�the�global�prices�of�Thermal�Coal�in�November�2011�were�lower�than�in�April�2011.�But,�the�importers�have�to�pay�an�additional�Rs.�684.60�per�tones�to�import�the�same�quantity�of�thermal�coal.�

THE�IMPACT�OF�RUPEE�DEPRECIATION�ON�FERTILIZER�IMPORTS�SUGGESTS:�Been� an� increase� in� the� global� prices� of� DAP� fertilizer.� The� depreciation� of� rupee� has¬�Continuous�increase�in�further�aggravated�the�cost�pressures�on�the�industry.�The�prices�of�imported�fertilizer�can�also�adversely�impact�the�subsidy�burden�of�the�government.�Table�(1.5�&�1.6)�states�that�an�increase�in�the�global�prices�of�DAP�fertilizer�has�been�witnessed�between�the�months�of�May�2011�to�November�2011.The�combined�effect�of�a�depreciation�rupee�and�an�increase�in�dollar�prices�of�DAP�fertilizer�has�meant�that�the�importer�has�to�pay�an�additional�Rs.�3658.3�per�mt�to�import�the�same�quantity�of�coal.�The�effect�of�rupee�

tourists�can�enjoy�cost�effective�scenario�in�India.�It�may�lead�to�increase�the�business�of�hotel,�tours�and�travel�companies.�

�IMPACT�ON�COMPANIES�AND�CONSUMERS:A�depreciating�rupee�makes�import�of�Crude�oil�more�expensive�which�directly�leads�to�an�increase�in�the�operating�expense�of�the�companies.�Thereby�hitting�their�profit�margins.�For�the�consumers,�a�constant�rise�in�import�prices�of�crude�oil�would�mean�an�Increase�in�petrol�&�diesel�prices.

�IMPACT�OF�RUPEE�DEPRECIATION�ON�POWER�GENERATING�COMPANIES:�sharp�decline�in�the�value�of�the�rupee�is�bound�to�affect�the�power�generation�capability�of�power�plants�that�are�heavily�dependent�upon�imported�coal�for�electricity�generation.�This�would� mean� an� increase� in� the� level� of� energy� deficit� in� the� country.� Moreover,� a� fall�witnessed�in�power�generation�capacity�is� likely�to�have�an�adverse�effect�on�all�the�three�sectors�of�the�economy�namely�agriculture,�industry�and�services.�Another�dimension�to�the�rupee�depreciation�episode�is�that�not�only�has�the�expenditure�on�imports�increased�but�this�coupled�with�an�inflexible�tariff�structure�means�that�the�power�companies�are�going�to�suffer�huge�losses(see�table�1.3�&�1.4)

ROLE�OF�RBI�AND�DEPRECIATION�OF�RUPEE�RBI:Has�however� reacted�with�timely� interventions�by�selling�dollars� intermittently� to�broken�sharp� fall� in� the� currency.� The� outflow� of� dollar� reserves� from� RBI� makes�mandatory� its�interventions� due� to� the� decreasing� foreign� exchange� reserves.� The� foreign� exchange�reserves�of� India� in�December�2011�stood�at�270�billion�USD.�Recently�RBI�has� intervened�with�key�policy� initiatives�such�as� intervening� in�the�forward�contracts�policy.�As�per�new�RBI�policy�the�cancelled�forward�contracts�cannot�be�rebooked.�Exporters�in�order�to�gather�in�more�profits,�were�booking�forward�contracts,�then�cancelling�the�contracts,�and�again�rebooking�at�better�rate.�This�led�to�a�further�depreciation�in�rupee�and�fueled�speculations.�Besides,�RBI�occasionally�put�trading�limits�for�the�banks�in�the�foreign�exchange�market�in�order�to�broken�the�speculative�forces.�The�Reserve�Bank�of�India�intervened�in�the�market�to� take� into� custody� the� fall� of� rupee� as� it� crossed� the�55�per�dollar� limit�Monday.� It� has�issued�notification�that�the�positions�in�the�exchanges�(both�Futures�and�Options)�cannot�be�offset�by�undertaking�positions�in�the�OTC�market�and�vice-versa.�The�positions�initiated�in�the�exchanges�shall�be�liquidated�or�closed�in�the�exchanges�only.�Further,�the�position�limit� for� the� trading�member� AD� Category-I� bank� in� the� exchanges� for� trading� Currency�Futures� and� Options� shall� be� US$� 100� million� or� 15� per� cent� of� the� outstanding� open�interest,�whichever�is� lower.�It�also�advised�the�banks�dealing�in�foreign�currency�to�bring�

depreciation�becomes�more�evident�when�we�see�that�had�the�rupee�stayed�at�May�2011's�level�then�the�additional�amount�the�importer�would�have�to�pay�would�have�been�Rs.�945�per� mt.� Therefore,� due� to� rupee� depreciation� the� importers� burden� has� increased� by�Rs.2713.3�per�mt.

Conclusion:The� fall� in� the� value� of� currency� affects� a� lot� of� economic� growth� indicators.� Depreciation� ofRupee� reduces� the� inflow� of� foreign� capital,� rise� in� the� external� debt� pressure,� and� also� growIndia's� oil� and� fertilizer� subsidy� bills.� The�most� positive� impact� of� depreciation� of� rupee� is� theStimulation�of�exports�and�discouraging�imports�and�thus�improving�the�current�account�deficit.But,� even� after� significant� increase� in� the� exports� and� sales� in� this� year,� Indian� companies� areReporting�huge�foreign�exchange�losses�due�to�the�depreciation�of�Indian�rupee.�This�declines�theOverall�profitability�of� these� companies.�As� far� as� imports� are� concerned,� for� a� country� such�asIndia,� imports�are�necessary.�Grim�global�economic�outlook�along�with�high� inflation,�wideningCurrent� account� deficit� and� FII� outflows� have� contributed� to� this� fall.� RBI� has� responded�withTimely�interventions�by�selling�dollars�intermittently.�But�in�times�of�global�uncertainty,�investorsPrefer�USD� as� a� safe� haven.� To� attract� investments,� RBI� can� ease� capital� controls� by� increasingThe�FII�limit�on�investment�in�government�and�corporate�debt�instruments�and�introduce�higherCeilings� in� ECB's.� Government� can� create� a� stable� political� and� economic� environment.However,�a� lot�depends�on�the�Global�economic�outlook�and�the� future�of�Eurozone�which�willDetermine�the�future�of�INR.

References:[1]�Anshu�Grewal�(2013)�“Impact�of�Rupee-�Dollar�Fluctuations�on�Indian�Economy:�ChallengesFor�������Rbi&�Indian�Government”,�International�Journal�of�Computer�Science�and�Management�Studies�������Vol.�13,�Issue�06,�August�2013�ISSN:�2231-5268.[2]�AnubhaDhasmana�(2014)�“How�exchange�rate�changes�impact�Indian�manufacturing�firms”.[3]�Bagella,�M.,�L.�Becchetti,�and�I.�Hasan,�2006,�“Real�Effective�Exchange�Rate�Volatility�and������Growth:�A�Framework�to�Measure�Advantages�of�Flexibility�vs.�Costs�of�Volatility,”�Journal�of������Banking�and�Finance,�Vol.�30.[4]�Chanan�Pal�Chawla�“Understanding�the�Impact�of�Exchange�Rate�Fluctuation�on�the������Competitiveness�of�Business”.[5]�Coric,�B.,�Pugh,�G.�(2010).�“The�Effect�of�Exchange�Rate�Variability�on�International�Trade:������A�Meta-Regression�Analysis”,�Applied�Economics,�42(20),�pp.�2631-�2644.[6]�C.�R.�L.�Narsimhan�(2003)�“Rising�Rupees�Hidden�Massage”,�the�Hindu,�April�3�2003.[7]�Eichengreen,�B.�J.�(2008),�“The�Real�Exchange�Rate�and�Economic�Growth”,�International������Bank�for�Reconstruction�and�Development,�the�World�Bank.[8]�Investopedia�(2013)�“The�Effects�of�Currency�Fluctuations�onthe�Economy”������http://www.investopedia.com/articles/forex/080613/effects-currency-fluctuations�economy.

down�their�trading�limits�by�June's�end.�The�rupee�gained�in�the�morning�trade�and�was�at�54.60�against�the�dollar�but�tumbled�to�an�all-time�low�of�55.35�against�the�dollar�in�the�afternoon� session.� Apart� from� the� strong� dollar� globally,� the� foreign� fund� outflow� and�India's�trade�deficit�also�dragged�the�rupee�down.

[9]�Kenen,�P.,�Rodrik,�D.�(1986).�“Measuring�and�Analyzing�the�Effects�of�Short-Term�Volatility������In�Real�Exchange�Rates”,�Review�of�Economics�and�Statistics,�68(2),�pp.�311-315.[10]�Melvin,�M.�and�B.�Peiers�Melvin,�2003,�“The�global�transmission�of�volatility�in�the�foreign���������Exchange�market”,�The�Review�of�Economics�and�Statistics,�85�(3),�670-67[11]�Rabanal,�P.,�Tuesta,�V.�(2013).�“Nontradable�Goods�and�the�Real�Exchange�Rate”,�Open���������Economies�Review,�24(3),�pp.�495-535.[12]�Sumanjeet�(2007),�“Appreciation�of�the�Indian�Currency:�Implications�for�the�Indian���������Economy”,�World�Affairs:�The�Journal�of�International�Issues,�Vol�11,�No.�4,�winter,�pp�52-69.[13]�Zanna,�F.�Luis�(2005),�“Fighting�Against�Currency�Depreciation,�Macroeconomic���������Instability�and�Sudden�Stops”,�International�Finance�Discussion�Paper,�No�848,�December,Board�of�Governance�of�Federal�Reserve�System.

Aysha Thasneem Assistant�professorDepartment�of�Economics,B.E.T��Sadathunnisa�Degree�college�Bangalore-29

FALLINGRUPEEVALUEANDITSIMPACTONINDIANECONOMY

ABSTRACTThis�paper�explores�the�impact�of�Fall�in�the�rupee�value�and�its�impact�on�Indian�economy.�The�circumstances�which�have�been�created� for� the�economy�due� to� the�depreciation�of�rupee�against�dollar�reveals�that�there�has�been�a�strong�and�significant�negative�impact�of�this�currency�volatility�on�many�sectors.�There�is�a�direct�relationship�between�the�fall�in�the�rupee�value�and�inflation�and,�impact�on�local�currencies�in�terms�of�foreign�currencies�and�export�competitiveness�of�any�country�is�very�complex.�This�relationship�will�become�more�complex�if�there�is�the�heavy�dependence�on�imported�resources�in�the�exported�products.�During�last�the�71�years� it�has�seen�an�over�21-fold�depreciation�where�as� in�1948�its� less�than�Rs�4,� the� local� currency� lost�around�12�percent� to� the�US�currency.� Indian�economy�which�already�suffered�from�large�fiscal�and�current�account�deficit�adversely�affected�by�relatively�exchange�rate�pressure.�To�track� it�again�on�the�way�many�hard�decisions�were�taken�by�Indian�govt.�This�paper�presents�different�challenges�due�to�these�fluctuation�and�steps�triggered�by�the�central�bank�and�government�tocreate�stability.�

Keywords:�Impact�of�Rupee,Inflation�Dollar�Fluctuations,�dearer�imports��Exchange�Rate.�

Introduction�Inflation�has�become�one�of� the�most�predominant� financial� concern�of� the�developing�country.�Inflation�means�a�persistent�rise�in�the�price�.inflation�is�major�problem�in�india�is�due�to�fall�in�the�rupee�value.when�there�is�persistent�rise�in�the�price�level�,people�need�more� and� more� money� to� buy� goods� and� services.� Currency� fluctuations� are� a� natural�outcome�of�the�floating�exchange�rate�system�that�is�the�norm�for�most�major�economies.�The� exchange� rate� between� two� currencies� is� that� rate� at� which� one� currency� will� be�exchanged�with�another�currency.It�is�also�known�as�a�foreign-exchange�rate,��forex�rate.��Exchange�rate��of�one��currency�versus��the�other��is�influenced��by��numerous�fundamental�and� technical� factors� � These� include� relative� supply� and� demand� of� the� two� currencies,�

Objectives�The�main�objective�of�this�study�is�to�understand�the�concept�that�their�direct�relation�between�fall�in�the�rupee�value�and�inflation�and�Exchange�rate�and�currencyfluctuation��and��understand�the��causes��for��decline�of��the��rupee�against�dollar�the��real�implications�of�the�depreciation�of�the�rupee�on�the�Indian�economy�and�also�different�stringent�measures�by�Indian�government�to�make�rupee�stronger.�

Background�of�India's�InflationRise�in�prices�has�a�direct�bearing�on�value�of�rupee�as�we�will�purchase�less�amount�of�goods�with� the�same�price�prevailing�earlier� in� the�domestic�market.�Besides�with� inflation�rising�exports� will� become� costlier� and� imports� cheaper,� if� international� rupee� exchange� rate�remains� the�same.�This�will�make�our�Balance�of�Payment�position�weak,� leading�to� fall� in�exchange� value� of� rupee.� Inflation� is� an� invisible� tax,� which� erodes� money� value� and�national�income�of�the�people.

Inflation��may�due�to�Increase�in�demand�in�the�economy�and�supply�side�constraints.As�the�demand�for�goods�and�services�increases�the�imports�may�rise�due�to�supply�side�constraints

Now�Inflation�affects�the�exchange�rate�of�a�country�in�two�ways

By� Strengthening� the� Currency� -� As� read� above� inflation� raises� the� interest� rate� of� the�economy.�So�now�if�there�is�a�rise�in�inflation�this�leads�to�rise�in�interest�rates.�This�attracts�foreign�investors�and�demand�for�INR�rises.�This�demand�raises�the�value�of�the�currency�in�terms�of�other�currencies�(exchange�rate).

By�Weakening�the�Currency�-�Low�inflation�on�the�other�hand�will�lead�to�drop�in�interest�rates.�Foreign�investors�will�now�see�the�country�as�less�attractive�to�invest�in�and�will�move�funds�into�other�appropriate�high�returning�country�to�get�better�returns.�When�they�do�so,�they�sell�the�local�currency�in�order�to�buy�another�countries'�currency,�which�reduces�the�demand�of�currency.�This�leads�to�weakening�of�the�currency.

Impact�on�loans:� Inflation�has�been�a�major�focus�area�for�the�RBI�and�it�has�already�indicated�in�monetary�policy�review�in�June�that�only�a�durable�receding�of�inflation�will�make�room�for�further�monetary�easing.�Even�after�RBI�cutting�Repo�rates�3�times�by�overall�75bps�so�far�in�the�year�2013�banks�have�not�passed�on�any�benefit�of�these�rate�cuts�to�the�borrowers�as�there�has�hardly�been�

economic� performance,� outlook� for� inflation,� interest� rate� differentials,� capital� flows,�technical�support�and�resistance�levels,�and�so�on.�turned,�as�huge�movements�in�a�currency�can�dictate�the�economy's�fortunes��

Impact�on�FDs:�With�availability�of�other�avenues� like�Post�Office�deposits�offering�higher�rate�on�deposits�and�banks�facing�challenge�of�maintaining�their�deposit�growth�are�forced�to� offer� comparable� rate� to� the� depositors.� Hence� at� presents� banks� are� keeping� their�deposit�interest�rate�high.�However�when�RBI�goes�for�CRR�or�SLR�reduction�then�with�eased�liquidity�conditions�banks�would�have�better�scope�to�bring�down�their�deposits�rates.�So�till�the� time� this� reduction� takes� place� its� good� for� you� to� lock� in� any� surplus� or� maturity�proceeds�at�prevailing�higher�deposit�rates�around�9%.

If�you�are�an�NRI�and�have�some�surpluses�abroad�it�would�be�a�good�idea�to�transfer�a�part�of� it� at� the�current�exchange�rate�which�would�be�more� rewarding�than�past.�However� it�would�make�sense�to�wait�to�take�a�call�to�transfer�your�entire�corpus�to�India�only�when�you�see�a�significant�sign�of�pause�in�rupee�decline�or�start�of�rupee�regaining�some�of�its�loss

The�different�measures�used�for�controlling�inflation�are�

The�different�measures�(as�shown�in�Figure-5)�used�for�controlling�inflation�are�explained�below.

1.�Monetary�Measures:The�government�of�a�country�takes�several�measures�and�formulates�policies�to�control�economic� activities.�Monetary�policy� �measures� taken�by� the�government� to� control�inflation.

In�monetary�policy,�the�central�bank�increases�rate�of�interest�on�borrowings�for�commercial�banks.�As� a� result,� commercial� banks� increase� their� rate� of� interests� on� credit� for� the� public.� In� such� a�situation,�individuals�prefer�to�save�money�instead�of�investing�in�new�ventures.

any� reduction� in� lending� rates� by� the� lenders.�Due� to� tight� liquidity� conditions� and� high� cost� of�deposits� lenders� are� finding� it� difficult� to� reduce� their� lending� rates� and�were�waiting� for� RBI� to�reduce� the� CRR� or� SLR� to� reduce� their� lending� rates.� However� with� the� increased� concerns� of�inflation�rising�in�future�due�to�falling�rupee�the�scope�of�a�CRR�or�SLR�reduction�even�in�July�by�RBI�is�getting� limited.� The� only� hope� for� a� monetary� easing� in� July� hinges� on� monsoon� performance.�Hence�you�will�have�to�wait�a�little�longer�to�see�your�EMI�coming�down.

This�would�reduce�money�supply�in�the�market,�which,�in�turn,�controls�inflation.�Apart�from�this,�the�central�bank�reduces�the�credit�creation�capacity�of�commercial�banks�to�control�inflation.

The�monetary�policy�of�a�country�involves�the�following:(a)�Rise�in�Bank�Rate:.The�main�reasons�for�reduction�in�total�expenditure�of�individuals�are�as�follows;(i)�Making�the�borrowing�of�money�costlier:.(ii)�Creating�adverse�situations�for�businesses(iii)�Increasing�the�propensity�to�save(b)�Direct�Control�on�Credit�CreationThe�central�bank�directly�reduces�the�credit�control�capacity�of�commercial�banks�by�using�the�following�methods(i)�Performing�Open�Market�Operations�(OMO):(ii)�Changing�Reserve�Ratios

2.�Fiscal�Measures:In�fiscal�policy,�the�government�controls�inflation�either�by�reducing�private�spending�or�by�decreasing�government�expenditure,�or�by�using�both.

It� reduces� private� spending� by� increasing� taxes� on� private� businesses.� When� private�spending�is�more,�the�government�reduces�its�expenditure�to�control�inflation.�However,�in�present�scenario,�reducing�government�expenditure�is�not�possible�because�there�may�be�certain�on-going�projects�for�social�welfare�that�cannot�be�postponed.

3.�Price�Control:To� slow� inflation,� or,� alternatively,� to� ensure� a�minimum� income� for� providers� of� certain�goods�or�a� .�There�are�two�primary�forms�of�price�control,�a� ,�the�minimum�wage price�ceilingmaximum� price� that� can� be� charged,� and� a� ,� the�minimum� price� that� can� be�price� floorcharged.

The�prices�of�vegetables�and�fruits�are�beyond�the�supply�management�of�governments.�There�is�talk�of�fixing�the�hoarders.�There�is�structural�change�in�the�consumption�of�food�items.�Crude�oil,�metals,�rubber�and�food�are�causing�pricing�pressures.

ConclusionIndia�is�facing�a�huge�problem�of�inflation�,it's�the�responsibilities�of�Government�and�RBI�to�control� inflation�as�citizens�of� india�we� �have�certain�norms� to� follow�such�as�avoid�us�of�import� good� � acceralate� the� use� of� indian� products� as� the� government� has� � initiated�.Mimimum� need� price� to� � assist� the� farmers� introducing�metro� train� ,and� have� subsitut�reduce�the�imports�,avoid�using�crude�oil��

References:1.�Rockoff,�Hugh�(2008).�"Price�Controls".�In�David�R.�Henderson�(ed.).�The�Concise�Encyclopedia�of�Economics(2nd�ed.).�Indianapolis:�Library�of�Economics�and�Liberty.�ISBN�978-0865976658.�OCLC�237794267.2.�^�Alston,�Richard�M.;�Kearl,�J.R.;�Vaughan,�Michael�B.�(May�1992).�"Is�There�a�Consensus�Among�Economists�in�the�1990's?"�(PDF).�82�(2).�American�Economic�Review:�203‒209.�Retrieved�October�17,�2015.3.�^�Banarsi�Prasad�Saksena�(1992)�[1970].�"The�Khaljis:�AlauddinKhalji".�In�Mohammad�Habib�and�Khaliq�Ahmad�Nizami.�A�Comprehensive�History�of�India:�The�Delhi�Sultanat�(A.D.�1206-1526).�5�(Second�ed.).�The�Indian�History�Congress�/�People's�Publishing�House.�p.�429.�OCLC�31870180.4.�^�"File:�"Prices�charged�in�this�store�will�not�exceed�those�indicated�in�the�most�recent�list�of�Fair�Prices�applicable�to�this�‒�NARA�‒�512556.jpg�‒�Wikimedia�Commons".�Retrieved�2012-01-21.5.�^�"File:�"Closed.�Public�Notice.�For�Violation�of�the�rules�of�the�United�States�Food�Administration�This�Place�is�Closed�days...�‒�NARA�‒�512564.tif�‒�Wikimedia�Commons".�Retrieved�2012-01-21.6.�^�"File:�"This�Store�sells�at�FAIR�PRICES�as�interpreted�by�U.S.�Food�Administration...",�ca.�1917�‒�ca.�1919�‒�NARA�‒�512714.tif�‒�Wikimedia�Commons".�Retrieved�2012-01-21.7.�^�"File:�"We�violated�the�regulations�of�the�Food�Administration�but�have�pledged�Full�Obedience�in�the�Future.",�ca.�1917�‒�ca.�‒�NARA�‒�512528.jpg�‒�Wikimedia�Commons".�Retrieved�2012-01-21.

Chowdappa C.B. M.A.,M.Phil.,�M.Ed,�LLB,�K-SET,(�Phd)Assistant�ProfessorSEA�Degree�College

ABSTRACTIn�today's�world�devaluation�is�one�of�the�emerging�trends�&�its�influence�is�very�vast.�it�is�nothing�but�decreasing� the� value�of�national� currency� relating� to� the�other� currency� .� in�modern� monetary� system� ,� it� is� nothing� but� depreciation� in� the� value� of� currency� with�respect� to�goods,� service� or� other�monitory� units.� balance� of� payment,� foreign� currency,�foreign� trade,� export� import� are� the� leading� trends� in� present� scenario.� since�independence� India� is� facing� a� biggest� crises� and� that� is� devaluation.� US� is� one� of� the�trading�country�for�many�nations�&�bone�of�the�importer�of�goods�&�service�from�across�the�world.�if�any�changes�in�US�economy�will�directly�affect�other�countries.

This�paper�is�based�on�devaluation�of�Indian�currency�against�other�currency�&�it�explains�how� it� affect� Indian�economy,�whether� it�has�positive�value�or�negative�value,� in� term�depreciation�or�appreciation�of�currency.Key�words:�Devaluation,�foreign�exchange,�balance�of�payment

INTRODUCTIONAt�the�time�of�independence�Indian�rupee�was�linked�with�British�pound�&�its�value�was�at�par�with�American�dollar.GOI�decided� to�adopt�fixed�rate�currency� regime� ,� in�1991� India�faced�serious�balance�of�payment�crises�so�India�forced�to�devalue�its�currency .�The�country�was�in�the�grip�of�high�inflation,�low�growth�and�the�foreign�reserves�were�not�even�worth�to� meet� weeks� of� imports.� India� being� a� developing� economy� with� high� inflation,�depreciation�of�the�currency� is�quite�natural.� the�main�reason�of�devaluation� is�to�reduce�debt�burden�&�to�achieve�higher�economic�growth�this�all�happens�to�increase�standard�of�living.�

REVIEW�OF�LITERATUREEdwards�(2000)�investigated�the�dynamic�association�between�exchange�rate�regimes,�capital�flows�and�currency�crises�in�emerging�economies.�He�concludes�that�under�the�appropriate�conditions�and�policies,�floating�exchange�rates�can�be�effective�and�efficient.

Taylor�(2001)�discusses�the�failure�of�liberalized�policies�.�He�says�that�country�has�failed�in�maintaining�the�liberalized�policies�about�capital�flows.

DEVALUATIONOFINDIANCURRENCY

OBJECTIVES�OF�THE�STUDY·��To�identify�the�importance�of�devaluation·��To�study�the�role�of�foreign�trade,�foreign�exchange�&�BOP·��To�recognize�the�contribution�of�monetary�policy�towards�GDP

METHODOLOGYThe�data�and�information�for�the�study�is�gathering�from�secondary�sources�like�news�paper,�magazines�&�various�websites�including�website�of�RBI�&�Government�Of�India.

SCOPE�OF�THE�STUDYThis�paper�aims�to�know�the�effects�of�Indian�currency�depreciation�against�the�dollar,�what�are�all�the�factors�to�influencing�the�currency�devaluation�against�the�dollar.

ROLE�OF�RBI�IN�CURRENCY�MANAGEMENTThe�Reserve�Bank�manages�currency�in�India.�The�Government,�on�the�advice�of�the�Reserve�Bank,�decides�on�the�various�denominations.�The�Reserve�Bank�also�co-ordinates�with�the�Government� in� the� designing� of� bank� notes,� including� the� security� feature.� The� Reserve�Bank�estimates�the�quantity�of�notes�that�are� likely�to�be�needed�denomination-wise�and�places� the� indent� with� the� various� presses� through� the� Government� of� India.� The� notes�received�from�the�presses�are� issued�and�a�reserve�stock�maintained.�Notes�received�from�banks�and�currency�chests�are�examined.�Notes�fit�for�circulation�are�reissued�and�the�others�(soiled�and�mutilated)�are�destroyed�so�as�to�maintain�the�quality�of�notes�in�circulation.�The�Reserve�Bank�derives�its�role�in�currency�management�on�the�basis�of�the�Reserve�Bank�of�India�Act,�1934.

EXCHANGE�RATE�INR/USD0. . 4 0. . 5 0. . 6 0. . 7 0. / . 0. / / 0. / / 0. / / 0. / 0 0. / 0 23,/ 3 2/ ,. 2 17,63 27,74 22,42 22,30 23,02 32,01 3/ ,4 33.98 �

یوھو يوھو يوھو ىوھو ىوھو ووھو یوھو ی لآي يييي ييوي وھي وھوي ويىي ھ

FACTORS�INFLUENCING�CURRENCY�DEVALUATION

Advantages�of�devaluation1.�Exports�become�cheaper�and�more�competitive�to�foreign�buyers.�Therefore,�this�provides�����a�boost�for�domestic�demand�and�could�lead�to�job�creation�in�the�export�sector.2.�A�higher�level�of�exports�should�lead�to�an�improvement�in�the� �current�account�deficit.����This�is�important�if�the�country�has�a�large�current�account�deficit�due�to�a�lack�of�����competitiveness.3.�Higher�exports�and�aggregate�demand�(AD)�can�lead�to�higher�rates�of�economic�growth.4.�Devaluation�is�a�less�damaging�way�to�restore�competitiveness�than�' '.�internal�devaluation����Internal�devaluation�relies�on�deflationary�policies�to�reduce�prices�by�reducing�aggregate�����demand.�Devaluation�can�restore�competitiveness�without�reducing�aggregate�demand.5.�With�a�decision�to�devalue�the�currency,�the�Central�Bank�can�cut�interest�rates�as�it�no������longer�needs�to�'prop�up'�the�currency�with�high�interest�rates.

CHALLENGES�OF�DEVALUATION·�Reduces�the�purchasing�power�of�citizens�abroad.�e.g.�it�is�more�expensive�to�go�on�holiday���abroad.·�Reduced�real�wages.�In�a�period�of�low�wage�growth,�a�devaluation�which�causes�rising����import�prices�will�make�many�consumers�feel�worse�off.�This�was�an�issue�in�the�UK�during����the�period�2007-2018.·�A�large�and�rapid�devaluation�may�scare�off�international�investors.�It�makes�investors�less���willing�to�hold�government�debt�because�the�devaluation�is�effectively�reducing�the�real����value�of�their�holdings.�In�some�cases,�rapid�devaluation�can�trigger� .capital�flight·�If�consumers�have�debts,�e.g.�mortgages�in�foreign�currency�‒�after�a�devaluation,�they�will���see�a�sharp�rise�in�the�cost�of�their�debt�repayments.�This�occurred�in�Hungary�when�many���had�taken�out�a�mortgage�in�foreign�currency�and�after�the�devaluation�it�became�very���expensive�to�pay�off�Euro�denominated�mortgages.

CONCLUSION�currently�the�economic�condition�of�India�is�unstable,�Inflation�is�increasing�so�GOI�has�to�take�immediate�steps�to�overcome�this�problem.�To�increase�rupee�value,�India�has�to�work�upon�the�reasons�which�all�noted�above�and�has�to�take�right�decision�based�on�the�same.�As�imports�are�exceeding�exports,�India�should�increase�exports�which�will�lead�to�inflow�of�foreign�currency.

Reference

"Dollar�Exchange�Rate�from�1940"1..�miketodd.net.�Retrieved�14�October�2018.2. Jenkins,�Roy�(1998).�The�Chancellors.�London:�Macmillan.�p.�448.� �^ ISBN

.03337305773.� Beckett,�Francis�(1997).�Clem�Attlee.�London:�Richard�Cohen�Books.�p.�235.� �^� ISBN

.1860661017�4.Doerer,�Kristen�(Aug�17,�2015).�"Your�guide�to�China's�devaluation�of�its�currency".�PBS�NewsHour.�^ Krugman,�Paul

5.;� �(1999).�"17�[Appendix�II]".�International�Economics�(5th�ed.).�Obstfeld,�Maurice.� � .Longman ISBN 978-0-321-07727-1

Farheen Taj SNDMASTER�OF�COMMERCE�(MCOM�2 �YEAR)

CENTRAL�COLLEGE,�BANGALORE�UNIVERSITY�BOARD�,�BENGALURU�Contact:-9743221466E-MAIL�ID:[email protected]

FALLINGRUPEEVALUEANDTHERBI'sMONETARYPOLICY

ABSTRACTFrom�the�early�1980s�the�International�Monetary�Fund�(IMF)�has�projected�devaluation�as�a�potential� solution� for�developing�nations� that� are� constantly� spending�more�on� imports�than� they� earn� on� exports.� A� lower� value� for� the� home� currency�will� raise� the� price� for�imports�while�making�exports� cheaper.� Fall� in� value�of� rupee� can� lead� to� a� reduction� in�citizens'� standard� of� living� because� their� purchasing� power� is� reduced� when� they� buy�imports�and�when�they�travel�abroad.�It�also�can�add�to�inflationary�pressure.�Devaluation�can� make� interest� payments� on� international� debt� more� expensive� if� those� debts� are�denominated� in�a� foreign�currency,� and� it� can�discourage� foreign� investors.� The�present�paper�aims�to�explore�the�real�implications�and�causes�of�the�depreciation�of�the�rupee�on�the�Indian�economy.�Moreover;�it�estimates�that�the�Indian�economy�has�more�to�lose�and�less�to�gain�with�depreciation�of�rupee�in�long�run.KEYWORDS:��Depreciation,�current�account�deficit�government�deficit�trade�deficit.

INTRODUCTIONThe�exchange�rate�means�how�much�one�currency�is�worth�in�terms�of�another�currency�($1�=�Rs.�55).�There�are�two�types�of�exchange�rate�-�Fixed�and�Floating.�Some�countries�have�fixed� exchange� rate� systems� and� some� have� floating.� The� fixed� exchange� rate� doesn't�fluctuate�because�of�government�intervention�while�the�floating�exchange�rate�on�the�other�hand�keeps�on�changing�constantly�just�like�the�stock�market.�India�has�a�Managed�Floating�Exchange� Rate� System� which� means� that� the� Indian� government� intervenes� only� if� the�exchange�rate�seems�to�go�out�of�hand�by�increasing�or�reducing�the�money�supply�as�the�situation� demands.� When� rupee� is� appreciating,� it� means� that� our� currency� is� gaining�strength�and�its�value�is�increasing�with�respect�to�dollar�while�when�rupee�is�depreciating,�it�means�our�currency�is�getting�weaker�&�its�value�is�falling�with�respect�to�dollar.

CURRENT�SCENARIO�It� is� recognized� that� cumulative� effect� of� several� national� and� international� factors,�including�the�Eurozone�crisis,�for�the�devaluation�of�the�Indian�rupee,�which�hit�a�record�low�of�56.40�against�the�dollar�this�week.�There�are�multiple�reasons�which�are�responsible�for�the�fluctuation�in�the�value�of�the�rupee.�The�volatility�in�the�oil�prices�and�the�uncertainty�in�

Daily�News�&�Analysis(�May�23,�2012)�Continuing�free-fall�for�the�sixth�day�in�a�row,�rupee�crashed�below�the�psychological�level�of�56�against�US�dollar�to�yet�another�all�time�low�on�heavy� demand� for� the� American� currency� from� importers,� especially� oil� refiners,� amid�foreign� fund� outflows� and� weak� equities.� At� the� Interbank� Foreign� Exchange� (Forex)�market,�the�domestic�unit�recorded�its�steepest�fall�ever�by�dipping�below�the�crucial�levels�of�Rs55�and�Rs56�per�dollar�within�a�span�of�two�days,�forex�dealers�said.�After�a�lower�start�at�55.82,�the�rupee�continued�its�downward�journey�by�losing�74�paise�at�56.13�at�1350�hrs.�Strong�dollar�demand�from�importers�pulled�rupee�down�to�a�record�low�of�56.13,�placing�the�domestic�currency,�which�has�lost�over�12%�since�March�this�year.�Forex�dealers�said�the�American�currency�remained�in�demand�even�as�the�Reserve�Bank� imposed�restrictions�of�forward� contracts� by� banks� and� arbitrage� trading.� They� said� capital� outflow� of� foreign�funds�from�falling�markets�remained�a�major�driver�behind�the�rupee's�fall�as�dollar�surges�because�investors�are�finding�the�American�currency�a�safer�bet�amid�concerns�that�Greece�might�exit�euro-zone.�The�table�1�exhibits�that�the�greatest�decline�in�the�value�of�rupee�was�in�1992�while� the�highest�growth� in� the�value�of� rupee� in� the�year�1978.�Except� the�year�1977-80,�2003,�2004,�2005,�and�2010;�the�decline�in�the�value�of�rupee�was�recorded�in�each�year.

Table�1:�Showing�Movement�in�Indian�Rupee�Rate�(INR)�‒�At�a�Glance

Europe�have�resulted�in�a�situation�where�many�agents�are�putting�their�surplus�in�America�which�is�considered�a�safe�haven�at�present.�Back�in�the�country,�the�reduction�in�exports�and�increase�in�imports,�and�the�fiscal�deficit�has�increased�as�also�current�account�deficit�which�also� have� played� their� part.� It� has� been� observed� that� the� decrease� in� demand� of� Indian�goods�in�European�market�for�the�decline�in�exports�and�economic�recovery�at�the�moment�is�poor�and�fragile.�It�is�hoped�for�a�flow�in�foreign�institutional�investment�(FII)�and�foreign�direct� investment�(FDI),�the�government�has�been�taking�necessary�steps�at�the�opportune�time�for�attracting�investments.

MEANINGIt�is�implied�that�when�the�rupee�“weakens”�against�the�dollar,�it�is�a�loss�of�national�prestige�and�of�economic�power.

The�main�reasons�for�appreciation�or�depreciation�of�Rupee�are:(I)� Interest� Rate:� The� interest� rate�differentials� create�demand�between� two�countries.� In�developing�countries�like�India�interest�rate�prevails�around�6-8%�which�encourage�capital�inflow�as�investors�as�they�can�get�better� return�than�what�they�might�get� in�their�home�countries�like�US�(with�Interest�rates�of�1.5-�3%)�which�lead�to�rupee�appreciation

.(ii)� Inflation�Rate:�The�demand�for�a� India's�goods�&�services�by�the�foreign�buyers�would�be�more�when�the�inflation�rate�is�lower�in�India�compared�to�other�countries.�It�may�lead�to�higher�demand�for�Indian�currency�resulting�in�the�appreciation�of�the�Indian�currency.�

(iii)� Forex� market:� There� are� fluctuations� in� exchange� rate� at� every� moment� due� to�speculative�trading�in�the�Forex�market�which�depends�on�various�fundamental�factors�like�the�growth�potential�in�the�economy,�interest�rate�differential�and�the�inflation�rate�existing�in�different�countries.�In�India�the�government�purchases�rupee�in�exchange�for�the�foreign�currency� to� increase�money� supply� in� the� economy� resulting� depreciation� of� the� Indian�currency�while� it�purchases� foreign� currency� in�exchange� for� rupee� to� reduce� the�money�supply�in�the�economy�resulting�appreciation�of�the�Indian�currency.

� (iv)� Export-Import:� If� a� country� (India)� is� exporting� more� than� its� imports� from� other�countries,� then� this�would�mean�higher�demand� for� that� currency� (rupee)�which� leads� to�appreciation� of� that� currency� against� others.� From� the� early� 1980s� the� International�Monetary� Fund� (IMF)� has� proposed� devaluation� as� a� potential� solution� for� developing�nations�that�are�consistently�spending�more�on�imports�than�they�earn�on�exports.�Experts,�who�a�few�weeks�ago�predicted�that�the�Indian�currency�might�stabilize�at�55�rupees�to�the�dollar,�now�say�this�may�happen�at�60�rupees.�There�are�mainly�two�ways�by�which�currency�rates�are�managed.�Firstly,�countries�fix�their�currency�against�dollar.�Hence�the�exchange�rate�doesn't�change.�Government�takes�action�to�manage�any�fluctuation�that�may�happen.�Secondly,�countries� leave�it�to�the�market�to�decide�their�exchange�rate.�In�such�a�system,�

MAJOR�REASONS�BEHIND�FALL�IN�THE�VALUE�OF�INDIAN�RUPEE�The� value� of� a� currency� depends� on� factors� that� affect� the� economy� such� as� imports� and�exports,� inflation,� employment,� interest� rate,� growth� rate,� trade� deficit,� performance� of�equity� markets,� foreign� exchange� reserves,� macroeconomic� policies,� foreign� investment�inflows,� banking� capital,� commodities� prices� and� geopolitical� conditions.� Income� levels�influence� currencies� through� consumer� spending.� When� incomes� increase,� people� spend�more.�Higher�demand�for�imported�goods�increases�demand�for�foreign�currencies�and,�thus,�weakens�the�local�currency.�

Mounting� Current� Account�Deficit:� Current� account� deficit� indicates� the� status� on� trade�between�a�country�and�the�rest�of�the�world.�Any�deficit�in�current�account�shows�that�a�country's�total�imports�of�goods,�services�and�transfers�is�greater�than�the�country's�total�export�of�goods,�services�and�transfers.�This�situation�makes�a�country�a�net�debtor�to�the�rest�of�the�world.�In�such�situation,�a�country�has�to�buy�more�foreign�currency�to�meet�its�need�within�the�country.� It� leads�to� increase� in�the�demand�for�the�foreign�currency�and�increased�demand�of�foreign�currency�which�further�lead�to�increase�the�value�of�foreign�currency� while� reducing� the� value� of� that� currency� of� that� country.� The� deficit� was�registered�$74bn�during�the�year�in�2011-12�which�was�$46bn�in�the�year�2010-11.�It�was�a�huge� jump.� It�also�recorded�continue�higher�at�$�77bn.The�foreign�exchange�reserves�of�India�have�dropped�from�a�peak�of�$320bn�in�September�2011�to�$290bn�now.�However,�a�considerable�current�account�deficit� is�not�necessarily�a�bad�thing�for�certain�developing�counties� which� may� run� a� current� account� deficit� in� the� short� term� to� increase� local�productivity�and�exports�in�the�future.

Inflation:�Inflation�is�a�process�of�persistent�rise�in�general�price�level.�A�country�that�has�a�consistently�lower�inflation�rate,�value�of�its�currency�will�rise�as�it�increases�the�purchasing�power�in�comparison�to�other�countries.�A�fall�in�purchasing�power�due�to�inflation�reduces�consumption,� hurting� industries.� Imports� also�become�costlier.�Exporters,� of� course,� earn�more�in�terms�of�local�currency.�

countries�follow�policy�of�non-interference.�India�doesn't�have�a�fixed�value�of�rupee�against�dollar�but�it�also�doesn't�keep�its�currency�completely�floating�against�dollar.�In�India�there�is�a�system�where�the�central�bank�allows�rupee�to�fluctuate�within�a�specified�range.�A�billion�dollar�question�is�that�why�are�investors�not�investing�in�the�Indian�markets,�while�they�are�shifting� from� European�markets?� The� Indian� economic� scenario� for� the� year� 2011-12� has�been�snowed�under�by�high�rate�of� inflation,�and�extremely�low�growth�in�manufacturing�sector.� The� growing� effects� of� these� factors� are� leading� to� a� shift� in� investor� sentiments�towards�dollar�market.

Corruption� and� Political� Instability:� Under� Congress� government� regime,� a� series� of�corruptions�cases�are�being�observed�which�has�reduced�confidence�among�investors.�The�central�government�has�failed�to�implement�effective�economic�reforms�during�its�tenure.�A�lot� of� agitation� (especially� Anna� Hazare's� compaign)� was� made� which� were� common� in�world� media.� It� creates� unrest� among� the� investors.� There� is� a� lack� of� firm� initiative� by�government�on� issues� like�allowing�FDI� in� retail.�Recent�debacles�such�as�2G�have�further�rendered� the� Indian�market�unattractive� to�a�certain�extent.�Therefore,� there� is�a�need�of�political�reforms�in�India�so�that�positive�attitude�can�be�created�among�investors.

� Mounting� Demand� of� Dollar:� The� following� forces� increased� the� demand� of� dollar� in�previous� year� to� now.� Due� to� instability� in� European� markets,� investors� are� considering�dollars�as�a�safe�haven�for�their�investments�in�the�longer�run.�In�an�atmosphere�of�fear�of�sovereign�defaults,�banking�crises�and�a�return�to�recession,�the�dollar,�which�was�expected�to�weaken�because�of�economic�circumstances�in�the�United�States�and�was�indeed�drifting�downwards,� is� suddenly� gaining� in� strength.� A� host� of� alternative� assets̶oil,� gold� and�metals�among�them̶which�were�targets�of�a�bull�run�previously�are�all�of�a�sudden�being�dumped� in� favour� of� the� dollar.� The� rupee� and� other� currencies,� it� is� argued,� suffer� on�account�of�this.�But�uncertainty�has�been�with�us�for�long,�and�those�assessing�the�dollar's�recent�rise�do�recognise�the�role�of�speculative�investors�in�competing�asset�markets.�So�it�is�quite�possible�that�speculation�played�a�role�in�India's�liberalised�currency�market�too.�This�led� to� an� increased� demand� for� dollars� vis-à-vis� the� supply� for� rupee� and� thus� the�depreciation�The�drop�in�rupee�can�be�mainly�credited�to�the�speculations�prevailing�in�the�markets.�Due�to�a�sharp�increase�in�the�dollar�rates,�importers�unexpectedly�started�panting�for�dollars� in�order� to�hedge�their�position.� It�has� led� to�an� increased�demand� for�dollars.�Alternatively�exporters�kept�on�holding�their�dollar�reserves,�speculating�that�the�rupee�will�fall� further�in�future.�This� interchange�between�the�two�forces�further�fuelled�the�demand�for�dollars�while�sequestering�its�supply�from�the�market.�This�further�led�to�the�fall�in�rupee.�Finally,�there�has�been�shift�of�FII's�(Foreign�institutional�investors)�from�the�Indian�markets�during�the�current�financial�year�2011.�As�per�a�recent�report,�the�share�of�India's�FII�in�the�developing�markets�has�decreased� considerably� from�19.2�%� in�2010� to�3.8%� in� the�year�2011.� They� are� taking� their� investments� out� of� the� Indian�markets�which� have� led� to� an�increased�demand�for�dollars,�further�leading�to�a�spiraling�rupee.�

High�Government�Deficit:�In�previous�years�a�government's�total�expenditures�has�exceeded�continue� the� revenue� that� it� generates� (excluding� money� from� borrowings)� and� was�registered�nearly�10�percent�of�GDP.�The�highest�deficit�has�lead�to�lost�faith�in�the�Indian�economy.�

Mounting�Trade�Deficit:� India's� trade�deficit� in� the�2011-12�fiscal�years� is� seen�at�USD�185�billion,�higher�than�a�revised�estimate,�mainly�on�a�surge� in�crude�oil�prices.� India� imports�nearly� 80%� of� its� crude� oil� needs.� A� $1� per� barrel� decrease� in� crude� price� reduces� the�country's�deficit�by�$900m�at�existing�import�volumes.�Similarly,�in�last�month�India's�trade�deficit�for�the�2011-�12�financial�year�that�ended�on�March�31�would�likely�touch�USD�175-180�billion�from�an�earlier�estimate�of�USD�160�billion.�April-March�exports�have�crossed�USD�300� billion� while� imports� during� the� period� were� seen� at� USD� 485� billion.� Due� to� India�imports�more�goods�(in�value�terms)�than�it�exports,�it�results�in�a�huge�imbalance�in�trade�which�leads�to�too�demand�of�foreign�currency�and�reduce�the�value�of�Indian�rupee.�

Outflows� of� Foreign� Capital:� This� is� burning� issue� in� Indian� economy� at� present.� Due� to�global� uncertainty� and� various� economy� crises� like� Europe� Sovereign� debt� problems,�investors� are� considering�dollars� as�a� safe�haven� for� their� investments� in� the� longer� run.�This� led� to� an� increased� demand� for� dollars� vis-à-vis� the� supply� for� rupee� and� thus� the�depreciation.�It�created�safety�feeling�among�the�investors.�Therefore,�they�quickly�pulling�out�the�money�from�Indian�market�and�investing�in�any�other�safe�investment�like�Gold�or�US�dollar.�Foreign�Institutional�Investors�(FIIs)�have�been�selling�across�markets�and�pulling�out�money,�their�outflow�was�highest�from�India�in�2011,�compared�with�BRIC�peers�(Brazil,�Russia,�India�and�China)�and�other�emerging�markets.�According�to�data�compiled�by�EPFR�Global,�FIIs�withdrew�over�$4�billion�from�India�in�2011;�against�an�inflow�of�$1.35�billion�in�2010.Emerging�European�countries�and�China�are�other�markets�where�FII�outflows�during�2011�were�significant�at�$3.7�billion,�followed�by�Brazil�that�saw�$2.35-billion�being�pulled�out.�Foreign�equity�funds�have�been�withdrawing�from�these�markets�consequently�since�last�seven�weeks.�

Lower� Inflows�of�Foreign�Capital:� India� remained�unable� to�attract�enough� foreign�capital�as�well�as�money� from�non-resident�citizens� to�make�up� for� the� trade�deficit.�The� total�of�both�direct�and�portfolio� investment�inflows�into�India,�RBI�figures�exhibit�that�they�stood�at�$62�billion�in�financial�year�2007-08,�dropped�to�$28�billion�during�the�year�of�global�crisis�2008-09,�and� then�bounced�back� to�$70.1�billion� in�2009-10,�$64.4�billion� in�2010-11�and�close� to� $60� billion� during� the� first� 11� months� (April-February)� of� 2011-12.� If� aggregate�investment� flows� are� seen� as� influencing� the� value� of� the� rupee,� the� depreciation� of� the�rupee� in� crisis� year� 2008/09,� from� less� than� Rs� 40� to� the� dollar� to� Rs� 52� to� the� dollar,� is�explained�well�by�the�figures,�which�point�to�a�significant�decline� in�the�volume�of�capital�inflows�into�the�country�during�that�period.�The�following�appreciation�of�the�currency�to�a�level�of�about�Rs�44�to�the�dollar�by�late�2010�is�also�in�keeping�with�the�increased�foreign�exchange� inflow�that� the�revival�of� foreign� investment�resulted� in.�Foreign� investors�have�doubt�regarding� India's�commitment�to�economic�reforms,� retrospective�taxes,�and�policy�paralysis� within� the� government� have� forced� foreign� investors� to� either� postpone� their�

Oil�Prices:�(Business�Line�April�30,�2012)�International�oil�prices�have�risen�harshly�in�recent�months�because�of�the�political�uncertainties�in�West�Asia.�That�price�increase�has�not�yet�impacted� the� Indian� people� because� the� election� season� that� concluded� only� recently�forced� the� government� to� hold� back� on� increasing� the� domestic� prices� of� petrol� and�diesel.� But� with� this� round� of� elections� over,� there� are� powerful� forces� within� the�government�pushing�for�an�adjustment�of�domestic�oil�prices�to�bring�them�on�a�par�with�international�prices.�If�that�is�done,�the�increase�would�be�substantial.�Rupee�prices�would�have�to�be�increased�not�only�to�take�account�of�the�increase�in�the�dollar�price�of�oil,�but�also�the�depreciation�of�the�rupee�relative�to�the�dollar.�The�hike�would�be�substantial.�Oil�imports�are�where�a�weak�rupee�hurts�India�the�most.�At�$155.6�billion,�oil�accounted�for�nearly�32�per�cent�of�total�imports�($488.6�billion)�in�2011/12.�A�weak�rupee�increases�the�import�bill�and�cancels�out�the�benefit�of�any�decline�in�global�crude�prices.�Unfortunately,�investors� do� pay� attention� to� ratings,� including� speculative� investors.� Having� exposed�itself� excessively� to� such� investors,� India's�government�does�have� reason� to� fear� further�downgrades�and�further�volatility.

Rupee�Speculation:�It�refers�to�the�flow�of�funds�(or�capital)�from�one�country�to�another�in�order�to�earn�a�short-term�profit�on�interest�rate�differences�and/or�anticipated�exchange�rate�shifts.�These�can�move�very�quickly�in�and�out�of�markets,�potentially�leading�to�market�instability.

�RBI�is�unable�to�manage�its�exchange�rate,�and�reduce�the�adverse�impact�on�its�currency;�they�may�enter�the�market�in�a�big�way�to�sell�the�rupee.�As�a�result,�the�rupee�may�devalue�more� than� it� should.� Portfolio� inflows� stood� at� $27� billion� in� financial� year� 2007-08,� a�negative�$14�billion�during�the�year�of�global�crisis�2008-09(�an�outflow�in�that�year),�and�then� rose� to� $32.4� billion� in� 2009-10� and� $31.5� billion� in� 2010/11.� But,� these� short-term�flows�knocked�down�again�to�$18�billion�during�the�first�11�months�(April-February)�of�2011-12.�These�variations�in�foreign�capital�state�the�fall�in�the�value�of�rupee.

So�how�can�an�RBI�rate�hike�help�stem�the�rupee�slide?Cattle,�cocoa,�salt,�cloth,�tobacco�&�even�cigarettes�have�served�as�medium�of�exchange�for�goods�and�services.�And�don't�forget�‒�crypto-currencies.�When�the�currency�market�is�so�much�in�turmoil,�it's�a�good�opportunity�to�look�back�and�ask�what�money�really�does?�In�the�simplest�of�terms,�money�is�a�store�of�value�used�to�purchase�goods�and�services�and�which�can�be�saved�and�used�later.�

investment�decisions,�or�take�money�out�of�Indian�stock�markets.�Thus,�it�result�was�fall�in�the�value�of�rupee.

How�is�the�value�of�a�currency�unit�determined?�The�value�of�rupee�against�the�dollar�or�for�that�matter�any�other�currency�depends�on�the�market�forces�of�demand�and�supply.�

If�the�demand�for�dollar�increases,�then�the�value�of�rupee�depreciates�and�vice-versa.�For�example:� If� the� import�demand�has� risen,�which� requires�payment� in� foreign� currency,�then�the�domestic�currency�will�weaken.�

Some�of�the�other�factors�that�influence�the�value�of�rupee:�1.�Inflation�2.��Interest�rates�3.��Trade�deficit�4.��Macroeconomic�policies�5.��Equity�market�

What�role�does�RBI�play?�

The�Reserve�Bank�of�India�intervenes�in�the�currency�market�to�support�the�rupee�as�a�weak�domestic�unit�can�increase�a�country's�import�bill.�In�contrast,�a�weak�rupee�is�considered�good�for�exports,�which�is�why�exports-dependant�nations�love�to�keep�the�currency�low.

There�are�a�variety�of�methods�by�which�RBI�intervenes.�It�can�intervene�directly�in�the�currency�market�by�buying�and�selling�dollars.�If�RBI�wishes�to�prop�up�rupee�value,�then�it�can�sell�dollar�and�when�it�needs�to�bring�down�rupee�value,�it�can�buy�dollars.�

The�central�bank�can�also�influence�the�value�of�rupee�by�the�way�of�monetary�policy.�RBI�can�tweak�the�repo�rate�(the�rate�at�which�RBI�lends�to�banks)�and�the�liquidity�ratio�(the�portion�of�money�banks�are�required�to�invest�in�government�bonds)�to�control�rupee.�

The�aim�of�the�Reserve�Bank�is�to�ensure�that�a�weak�rupee�doesn't�increase�the�already�bloated�import�bill.�

Money�can�have�various�forms�‒�commodity�money,�fiat�money�or�commercial�bank�money.�Commodity�money�is�the�one�that�has�its�own�value�and�is�employed�as�a�medium�of�exchange.�Gold,�cocoa�or�cattle�fall�in�this�category.�Central�banks�around�the�world�still�do�some�form�of�currency�exchange�in�gold.�Fiat�money�is�the�one�that�does�not�have�anny�intrinsic�value�but�governments�declare�it�as�legal�tender.�Fiat�money�can�be�used�to�discharge�any�public�or�private�debt.�Modern-day�monetary�systems�are�based�on�fiat�money.�Cheques,�demand�drafts�and�banker's�drafts�are�called�commercial�bank�money.�

How�RBI's�rate�hike/cut�influences�rupee?�

The�repo�rate�is�an�instrument�used�by�the�Reserve�Bank�of�India�to�control�inflation.�It�is�the�rate�at�which�the�central�bank�(Reserve�Bank�of�India)�lends�money�to�commercial�banks�in�the�event�of�any�shortfall�of�funds.�

Higher�interest�rates�in�an�economy�tend�to�draw�foreign�investment,�increasing�the�demand�for�and�value�of�the�home�currency.�Similarly,�lower�interest�rates�tend�to�decrease�exchange�rates.�

RBI�can�raise�the�repo�rate,�which�leads�to�a�rise�in�interest�rates,�bond�yields�and�return�on�debt�papers,�drawing�more�investor�money�to�chase�better�returns�if�the�same�is�low�in�other�markets.�On�the�other�hand,�higher�interest�rates�stem�money�circulation�in�the�economy,�leaving�more�money�in�the�hands�of�RBI�to�manage�the�currency�demand-supply�situation.�

Also,�the�currency�value�drops,�it�tends�to�drive�up�inflation,�as�imported�goods�become�costlier.�By�raising�interest�rates,�the�central�bank�can�lower�demand�for�such�goods,�leading�to�pressure�on�prices.�

Hike�in�repo�rate:�A�hike�in�repo�rate�acts�as�a�disincentive�for�banks�to�borrow�from�the�central�bank�and�is�employed�by�RBI�to�control�money�circulation�and�thus�rein�in�inflation.�A�higher�repo�rate�can�reduce�money�supply�in�the�economy�and�thus�help�arrest�price�rise.�

Cut�in�repo�rate:�When�RBI�cuts�repo�rate,�banks�need�to�pay�less�interest�on�their�borrowings�from�RBI.�Thus,�banks�also�charge�less�on�their�loans�and�it�thereby�raises�money�circulation,�which�leads�to�price�rise�and�increase�economic�activity.�

ROLE�OF�RBI�AND�DEPRECIATION�OF�RUPEERBI� has� however� reacted� with� timely� interventions� by� selling� dollars� intermittently� to�broken�sharp�fall�in�the�currency.�The�outflow�of�dollar�reserves�from�RBI�makes�mandatory�its� interventions�due� to� the� decreasing� foreign�exchange� reserves.�The� foreign�exchange�reserves�of� India� in�December�2011�stood�at�270�billion�USD.�Recently�RBI�has� intervened�with�key�policy�initiatives�such�as�intervening�in�the�forward�contracts�policy.�As�per�new�RBI�policy�the�cancelled�forward�contracts�cannot�be�rebooked.�Exporters�in�order�to�gather�in�more� profits,� were� booking� forward� contracts,� then� cancelling� the� contracts,� and� again�rebooking� at� better� rate.� This� led� to� a� further� depreciation� in� rupee� and� fuelled�speculations.� Besides,� RBI� occasionally� put� trading� limits� for� the� banks� in� the� foreign�

exchange� market� in� order� to� broken� the� speculative� forces.� The� Reserve� Bank� of� India�intervened�in�the�market�to�take�into�custody�the�fall�of�rupee�as�it�crossed�the�55�per�dollar�limit�Monday.� It�has� issued�notification�that� the�positions�in� the�exchanges�(both�Futures�and�Options)�cannot�be�offset�by�undertaking�positions�in�the�OTC�market�and�vice-versa.�The�positions�initiated�in�the�exchanges�shall�be�liquidated�or�closed�in�the�exchanges�only.�Further,�the�position�limit�for�the�trading�member�AD�Category-I�bank�in�the�exchanges�for�trading� Currency� Futures� and� Options� shall� be� US$� 100� million� or� 15� per� cent� of� the�outstanding�open�interest,�whichever�is�lower.�It�also�advised�the�banks�dealing�in�foreign�currency�to�bring�down�their�trading�limits�by�June's�end.�The�rupee�gained�in�the�morning�trade�and�was�at�54.60�against�the�dollar�but�tumbled�to�an�all-time�low�of�55.35�against�the�dollar� in� the� afternoon� session.� Apart� from� the� strong� dollar� globally,� the� foreign� fund�outflow�and�India's�trade�deficit�also�dragged�the�rupee�down.

RBI�Monetary�Policy�October�2018�HIGHLIGHTS:�The�Reserve�Bank�of�India�(RBI)�today�kept�the�repo�rate�unchanged�at�6.5%,�spooking�the�market,�which�had�widely�expected�a�rate�hike�of�25�basis�points.�While�the�RBI�decided�to�maintain�the�status�quo,�it�turned�hawkish�and�ruled�out�any�rate�cut�in�future�by�changing�stance�from�'Neutral'�to�'Calibrated�Tightening'.

The�central�bank�held�its�fourth�Monetary�Policy�Committee�(MPC)�meeting�of�FY19�against�the�backdrop�of�the�sharp�depreciation�in�the�rupee,�rising�crude�oil�prices,�intense�pressure�on�current�account�deficit�(CAD)�and�liquidity�issues.�Market�watchers�and�top�economists�were�expecting�a�25�basis�point�hike�once�again�after�June�and�August.

Reacting�to�the�RBI's�surprise�decision,�the�rupee�breached�74�vs�dollar�mark�for�the�first�time�today,�before�paring�some�losses,�while�Sensex�closed�almost�800�points�down.�The�central�bank�had�hiked�interest�rate�by�25�basis�points�each�in�June�and�August,�citing�upward�pressure�on�inflation�and�volatility�in�crude�oil�prices.

Conclusion�Under�WTO�regime�Indian�Rupee�is�daily�hitting�new�all-time�lows�against�the�US�Dollar,�mainly�due�to�Europe's�debt�crisis.�Devaluation�can�be�seen�as�an�attractive�solution�to�unemployment�when�other�options,�like�increased�public�spending,�are�ruled�out�due�to�high�public�debt,�or�when�a�country�has�a�balance�of�payments�deficit�which�devaluation�would� help� correct.� A� reason� for� preferring� devaluation� common� among� emerging�economies�is�that�maintaining�a�relatively� low�exchange�rate�helps�them�build�up�their�foreign�exchange�reserves,�which�can�protect�them�against�future�financial�crises.�Since�India's� Imports� are� more� than� its� exports� (70%� Import� ‒� 30%� Export).Therefore,� a�depreciating�rupee�is�always�harmful�for�the�overall�economy.

A�country�that�sells�more�goods�and�services�in�overseas�markets�than�it�buys�from�them�has�a�trade�surplus.�This�means�more�foreign�currency�comes�into�the�country�than�what�is�paid�for�imports.�This�strengthens�the�local�currency.�In�practice,�however,�once�the�fall�began,�it�persisted� in� the� absence�of� central� bank� intervention.� This�was�possibly�because,� besides�the�factors�noted�above,�the�dollar�became�a�target�for�33speculators,�who�were�expecting�the�rupee�to�depreciate�and�therefore�holding�on�to�dollars�or�buying�into�it�for�subsequent�sale�at�a�profit.�It�is�only�when�the�RBI�finally�turned�proactive�and�intervened�in�the�market�did� the� dollar's� rise� vis-à-vis� the� rupee� halt� and� marginally� reverse� itself.� Imports� of�unnecessary�items�such�as�gold,�there�are�needed�to�be�restricted�in�India.�Management�of�foreign�capital�flows�has�been�one�of�the�foremost�challenges�for�Indian�policy�makers�in�the�last� decade.� Having� opened� up� to� overseas� capital,� India� has� long�wrestled�with� how� to�minimize�its�impact�on�the�rupee's�exchange�rate�and�interest�rates.�It�is�concluded�that�the�fall�in�the�value�of�Indian�rupee�has�some�consequences�which�could�have�mixed�effects�on�Indian�economy.

REFERENCES�

1.�Gakhar,�Kamlesh.2007.�Foreign�direct�investment�in�India1947�to�2007�policies,�outlook�and�trends,�and�outlook,�New�century�publication,�New�Delhi,�India.�2.�K.�Johnson�.2010.�The�effects�of�devaluation�of�rupee�on�economy.�International�Innovative�Journal�of�Finance,�Vol.�7,�p.�45-56�3.�Sharma�Konak.2006.Reforming�the�retail�sector.�Yojana,�July,�P.41-44�Economic�Survey,�2011-11�4.�Newspapers:�The�Economics�Time,�August�‒September,�2012�The�Business�Line,�July-�September,�2012�The�Hindu,�Septermber,�2012�The�Tribune,�August-Septmber,�2012