Rupee value fluctuation
This query is : Resolved
18 January 2012
Dear members, will u pls explain me about the factors that affect the fluctuation in Rupee value and the effect in detail?
18 January 2012
The value of any currency in an economy is hard to bet, to be stable for a long period of time as there are number of factor influencing its appreciation and the depreciation. The currency value of an economy influences the growth rate of GDP in an economy. Several other factors that have a direct influence on the over or the undervaluation of a currency are listed below:
Capital flows and the stock market of India
It’s important to note that in spite of suffering recession, an economy can grow if the capital inflow is constant or continuously rising. In India even if the GDP rate is less, the currency can still get overvalued due to excessive capital inflows made by the FII’s in the Indian economy.
Global currency trends
Like many other currencies Indian rupee have also tied its knot with some of the big economies of the world including the names of UK, US, Japan and Canada. The depreciation or appreciation in the currency any of these, especially in the US dollar, influences the valuation of the Indian currency in one way or the other.
RBI Intervention
The valuation of the Indian currency highly depends on RBI that manages the ‘balance of payments’, slight modification in which can define the over or the under valuation of the Indian currency.
Oil factors
India is a major importer of oil and the valuation of Indian money gets easily affected by the increase in the prices of the crude oil. It can further result in spreading inflation in an economy due to the over valuation of the Indian currency.
Political factors
Several other factors that affect the currency stability are some political factors like change in the government set up, introduction of new export and import policies, tax rates and many more.
Conclusively, there are many factors that arise from the economic structure of Indian economy and affect the valuation of the Indian currency that in turn affects the economic growth rate of the economy of a country.
The value of any currency in an economy is hard to bet, to be stable for a long period of time as there are number of factor influencing its appreciation and the depreciation. The currency value of an economy influences the growth rate of GDP in an economy. Several other factors that have a direct influence on the over or the undervaluation of a currency are listed below:
Capital flows and the stock market of India
It’s important to note that in spite of suffering recession, an economy can grow if the capital inflow is constant or continuously rising. In India even if the GDP rate is less, the currency can still get overvalued due to excessive capital inflows made by the FII’s in the Indian economy.
Global currency trends
Like many other currencies Indian rupee have also tied its knot with some of the big economies of the world including the names of UK, US, Japan and Canada. The depreciation or appreciation in the currency any of these, especially in the US dollar, influences the valuation of the Indian currency in one way or the other.
RBI Intervention
The valuation of the Indian currency highly depends on RBI that manages the ‘balance of payments’, slight modification in which can define the over or the under valuation of the Indian currency.
Oil factors
India is a major importer of oil and the valuation of Indian money gets easily affected by the increase in the prices of the crude oil. It can further result in spreading inflation in an economy due to the over valuation of the Indian currency.
Political factors
Several other factors that affect the currency stability are some political factors like change in the government set up, introduction of new export and import policies, tax rates and many more.
Conclusively, there are many factors that arise from the economic structure of Indian economy and affect the valuation of the Indian currency that in turn affects the economic growth rate of the economy of a country.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Taxable or Tax exempt
- CAPITAL GAIN BASE ON NOTIFICATION
- Form 140 tds
- TDS Deducted AY-2013-14 Not Reflected in 26as
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- ADVANCE PAYMENT OF ADVOCATE
- NRI starting business in India
- Demand Outstanding AY 2013-14 TDS Deducted not shown in 26as
- Invertaded duty struture
- CREDIT NOTES WITHOUT GST
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
- LLP audit under companies act
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
