The conversion rate from 1 USD to INR climbs to record high today. It almost bankrupted me (I invested tons of money in Forex (crying). Luckily it doesn’t kill me because, after all, it is just money). INR has been weakening for so many years. In fact, since 40 years ago.
Look at the bloody graph below:
In 1973, the USD/INR rate was 7.66. About 40 years later, it has almost octupled (increased 759.138% to be exact). Will Rupee continue to weaken? I hope it will rise till 1 USD = 100
0 INR so that I could cover my losses.
Let’s look at the reasons how it gets to its current state:
First of all, India is an importer for oil. Currency depreciation is not good for country like India as oil is priced in USD. The depreciation of its currency makes the oil become very pricey. But the country depends on oil to fuel its economy. These 2 facts alone bring the country into an endless downhill loop.
The Euro crisis also has its impact on Rupee as the products produced by India are sold to the European market. Lesser exports = lesser revenue for India.
India, being one of the developing countries, is facing fierce competitions with its peers. China for example, the fastest growing developing country, can produce better and cheaper goods for the market.
From the macroeconomic view, foreign investors are pulling their investment from India due to global recession. Foreign investors prefer to keep their money in their own country to make their balance sheet look nicer.
A depreciating currency will face high inflation rate. People buy less things with the same amount of money. This will lead to high interest rate (6-7%) to counter the inflation. However, high interest rate will normally trigger low economic growth. So, is this the end for INR?
According to certain sources, India is, without doubt, the worst performer among the developing countries.
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