DMPQ- . Throw light on the implications of rupee depreciation on Indian economy.

. First, India’s imports comprises of essentials such as crude petroleum, machineries and  fertilizers which become expensive raising their prices facilitating ‘import’ of inflation.  India is very susceptible to a stubborn and sticky inflation. It hurts the masses in terms of  across the board higher prices.

All imports become expensive including raw materials, goods and machineries which  further push up domestic costs. It brings with it negative sentiments in the economy,  makes investors cautious weary of investment and consumers’ reducing spending in the  economy. Thus, growth takes a down turn.

Negative sentiments and capital outflows impact the stock markets, which may not  directly affect the common man but gets reflected as part of negative sentiment in the  economy. It widens the current account deficit, which may require dipping into scarce  foreign exchange reserves and their ‘relative adequacy’ could well become ‘inadequate’ if  the deficit continues to widen. One cannot forget the situation of 1991 when India had  no other recourse of meeting the deficit by pledging its official levels of gold and seeking  commercial loan from International Monetary Fund.

There are genuine concerns arising out of a depreciating currency of the domestic  economy having larger faith in foreign rather than the domestic currency and as mentioned  previously, the looming fears of currency crisis.

However, a depreciating rupee does make exports cheaper as the same dollar can now  get more rupees. But exports are not only a function of prices but other aspects such  as quality, ability to meet changing demands and preferences, global demand, efficient  logistics, cargo-handling capacities, etc. Response to the historic depreciation of the  rupee has, for the first time, tested how much Indian exports are sensitive to prices or  can lower prices drive up exports from India. The impact cannot be immediate, of an overnight  increase  in exports depreciation is a correction’ and in the long run help India in achieving export (price)  competitiveness.

TSPSC  Notes brings Prelims and Mains programs for TSPSC  Prelims and TSPSC  Mains Exam preparation. Various Programs initiated by TSPSC  Notes are as follows:- For any doubt, Just leave us a Chat or Fill us a querry––

Hope we have satisfied your need for TSPSC Prelims and Mains Preparation

Kindly review us to serve even better

TSPSC Mains Test Series 2022

20 Quality mock tests and GS Mains Notes

Mains Test Series and Notes

Mains Printed Notes (With COD)

TSPSC Prelims Test Series 2022

24 Quality mock tests and GS Prelims Notes

Prelims Test Series and Notes

Prelims Printed Notes (With COD)

Subscribe to TSPSC Notes

Never Miss any TSPSC important update!

Join 2,499 other subscribers

error: Content is protected !!