What are the Causes of Rupee Depreciation?

Major Causes of Rupee Depreciation

The demand for any money, including Indian currency, determines its value. Any currency’s value rises if it needs to do (appreciation). Additionally, a currency’s value decreases if its demand diminishes (depreciation).

• The demand for Indian currency rises as more international investors invest in India.
• Foreign investors and businesses must first convert their funds into rupees before investing in Indian markets, which only accept rupees.
• As a result, the Indian rupee is in higher demand and is rising in value against the US dollar and other major currencies.
• When Indians or businesses import goods (such as crude oil, gold, and so on), they must pay in US dollars (the de facto global currency).
• Because of increased demand for the dollar, the rupee depreciates against it.
• Indians sell rupees to buy dollars because the US dollar is the currency used to settle international transactions.
• India consumes more crude oil than it produces.
• Because global oil prices have increased by more than 60% since 2022, Indian businesses must spend more money.

Summary:

What are the Causes of Rupee Depreciation?

The causes of the rupee’s devaluation are Inflation, the current account deficit, the balance of payments, the price of crude oil, currency wars, capital inflows from foreign portfolio investors, foreign direct investment, and other factors.

Related Questions:

• Which State is the Largest Producer of Wheat and Rice in India?
• Which of the Following Aquatic Animals does not have Gills?
• What are the Disadvantages of Organic Farming?
• Mutual Exclusion Problem Occurs __
• What were the Major Consequences of the Disintegration of the Soviet Union . . .
• Which of the Three ‘R’s are Regarded as Environment Friendly?
• Why was Margie Disappointed?