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Describe the Trends' in Exchange Rate of Rupee Vis-a-Vis the Major Currencies over the Last One Year. How Has It Effected the Indian Economy?

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Submitted By rohitbhoot
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The exchange rate fluctuations in India has been a topic of apprehension for the policy makers and common public. The exchange rate system in India, known as managed float, has evolved through a long process of probing for an suitable policy system for India. in view of the fact that exchange rates are relative prices of two currencies it is generally exaggerated by the relative productivity differential and real wage rates in the long-run. However, the bubbles arising out of assumption plays a major role in influencing the exchange rates in the short-run. The present state of affairs about the exchange rate fluctuations in India has been caused to a large extent by the worsening current account balance and the unfavorable expectations related with it. On the other hand, the question of interference by the government in the exchange rate market should be decided on the foundation of the impact of such exchange rate fluctuations on the real effective exchange rate and the likely effects on the employment situation in the country. There are an array of factors affecting the exchange rate fluctuations like interest rate, balance of trade, money supply, economic growth, foreign debt, inflation etc. India has seen a huge breakdown of the Rupee because of the adverse affects of these factors on the Indian currency. Mentioned below are the various sectors being affected by the Rupee depreciation.
Fuel Price: India imports most of its oil consumption. As a result of dwindling of domestic currency, the Oil Marketing Companies(OMCs) will have to pay more to the countries from where they import oil and this encumber is passed on to the Indian consumer. India saw a huge ascend in petrol and diesel prices in the year 2012-13. Given that fuel prices have increased, the overall cost of transportation in the economy has escalated because of which the cost of all the

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