What impact does the rupee's fluctuation against the U.S. dollar have on the Indian economy
Analyzing the effects of currency fluctuations on the economic landscape of India.
- Exports and Imports: A weaker rupee makes Indian exports cheaper abroad, boosting export competitiveness. However, it also makes imports more expensive, potentially increasing inflation.
- Foreign Debt: Fluctuations in the rupee can impact the cost of servicing foreign debt. A weaker rupee increases the rupee equivalent of debt repayments, potentially straining government finances.
- Foreign Investment: Currency volatility can influence foreign investors' confidence in the Indian economy. A stable or appreciating rupee may attract more foreign investment.
- Inflation: Depreciation of the rupee can lead to higher import costs, potentially fueling inflation in the economy.
- Current Account Deficit: A significantly weak rupee can widen the current account deficit as the cost of imports rises.
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a year ago