It is good for the US
and other European countries whose economic growth is booming consistently
throughout the period but in my point of view, the developing countries like
ours faces severe problems due to weakening of rupee against dollars. It has
some serious impacts in economy but it does have certain advantage too.
Over three months, the rupee has slide 15% against the dollar, which is
surging against most other currencies worldwide. The reason:economic recovery
in the US and the continued faith in the dollar as
the reserve currency of the world.
In my view the countries
like India and Nepal where there are yelps of agony over the rupee's slide, as if
its value against the dollar is some sort of measure of India's standing in the
world. The economy of these countries now will be more open
than it ever was and the rupee's movements are subject to the vagaries of
traders worldwide.
And a little depreciation is not a bad thing. Exports have been
sluggish for many months as the US and Europe struggled with their own woes and
lower-cost nations such as Bangladesh chipped away at our share of textile and
garment exports that could change with a weaker rupee.
At this stage the biggest gainer, of course, would be software exporter followed by a clutch of software, auto and machinery manufacturers. What's good for the exports is good for the current account deficit, which can narrow sharply on the back of this depreciation. The only source for the revenue generation for the developing country like ours is remittances, which are expected to rise quickly as working overseas seizes this window and send dollars back home.
Also the discretionary
imports, like fine foods, personal care products and so on will be discouraged.
And gold imports, a huge drain on foreign exchange reserves, are sure to get squeezed by higher
rupee prices.
The government should now focus on reining in inflation, part of the reason for the rupee's weakness and likely to go up because of that weakening. These sort of weakening of rupee has also made great impact in the Indian economy, to control in some extinct : “The Reserve Bank of India has done what it could by keeping interest rates fairly high, but a lot of inflation is related to administrative lapses. Release part of the 78-million-tonne grain mountain into markets to dampen food grain inflation, now at 17%.” As we all know our currency is pegged with Indian currency so the weakening of Indian rupee also impacts in our economy as well so the government should also take some corrective actions regarding it and nourish the economy towards consistent growth.
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