What impact does the fluctuation of the rupee against the U.S. dollar have on the Indian economy
Discuss how the rupee settling flat against the U.S. dollar can influence various economic factors in India.
Fluctuations in the rupee against the U.S. dollar can have several impacts on the Indian economy:
- Export competitiveness: A weaker rupee makes Indian exports cheaper, boosting competitiveness and increasing export revenues.
- Import costs: Depreciation of the rupee can lead to higher import costs for essential goods and commodities, impacting inflation rates.
- Foreign investment: A strong rupee can attract foreign investment as it indicates economic stability and potential returns for investors.
- Current account deficit: A stable rupee against the dollar helps in maintaining a balanced current account by promoting trade stability.
- Interest rates: Exchange rate stability can influence domestic interest rates, affecting borrowing and investment decisions.
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8 months ago