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Depreciation of the Indian Currency: Implications for the Indian Economy

Author

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  • Sumanjeet Singh

    (; Sobhasaria Engineering College, India)

Abstract

The Indian currency has depreciated by more than 20 per cent since April 2008 and breached its crucial 50-level against the greenback on sustained dollar purchases by foreign banks and stronger dollar overseas. The fall in the value of Indian rupee has several consequences which could have mixed effects on Indian economy. But, mainly, there are four expected implications of falling rupee. First, it should boost exports; second, it will lead to higher cost of imported goods and make some of the capital intensive projects more expensive to execute; third, it will increase the cost of dollar loans taken by companies and increase the foreign debt and fourth, it will slow-down the overall economic growth by increasing the interest rate and dissuade flow of FIIs. This paper studies 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.

Suggested Citation

  • Sumanjeet Singh, 2009. "Depreciation of the Indian Currency: Implications for the Indian Economy," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2009-04, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Apr 2009.
    • Handle: RePEc:aiu:abewps:29
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    References listed on IDEAS

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    1. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
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    Cited by:

    1. Sachin N. Mehta, 2013. "Analysis Of Trends In The Balance Of Payments In India," Working papers 2013-12-22, Voice of Research.

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