...can take to stabilize the situation. Most importantly we will see if global economic uncertainty rides over all the other domestic factors to determine strength of a currency especially in developing economies. Why don’t we need a depreciating INR? The persistent decline in rupee is a cause of concern. Depreciation leads to imports becoming costlier which is a worry for India as it meets most of its oil demand via imports. Apart from oil, prices of other imported commodities like metals, gold etc will also rise pushing overall inflation higher. Even if prices of global oil and commodities decline, the Indian consumers might not benefit as depreciation will negate the impact. The depreciating rupee will add further pressure on the overall domestic inflation and since India is structurally an import intensive country, as reflected in the high and persistent current account deficits month after month, the domestic costs will rise on account of rupee depreciation. Exchange rate risk also drives away foreign investors which in turn depreciates the local currency. Indian Rupee is currently caught in this vicious cycle; it will have to find a stable level to regain investors’ confidence. The depreciating rupee has serious effects on the external debt figures of the nation. The total external debt has increased by Rs. 2186.8 billion to Rs 16384.9 billion by the end of November 2011. Factors that pushed INR into the well Continued Global uncertainty: Owing to uncertainty prevailing...
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...The Indian Rupee Crisis Economics Essay-1 In this paper we are going to examine the cause and the impact of rupee depreciation on the Indian economy. Since last few months Indian rupee came under great stress as overseas investors are paring their exposure to Asia’s third-largest economy amid international uncertainty and mounting worries over the domestic economy. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. And now it is around 55 – 56 levels, the main reasons to examine are increase in import bill, higher inflation, fiscal mismanagement and all resulting in higher cost of borrowing. The rupee has lost more than 15% of its value this year, making it one of the worst performing currencies in Asia. This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee. This paper will firstly discuss about the economy of currency to give an overview of the problem and the factors related to it. Afterwards it will be examining the causes of the Indian rupee depreciation with respect to the Indian economy and the global economy. And after that it will analyse the impact of the same on trade and business. Finally, recommending the policy actions in response of the falling currency. II. LITERATURE REVIEW: These papers include the work which have been used as a basis or reference for formulating the policies regarding...
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...Project Report on Depreciation of Indian Rupee Seminar on Contemporary Issues of Management Submitted To: Submitted by: Ms. Tanya Nagpal Reema Bharti Reg no.10901821 Abstract In this project report on Depreciation of Indian Rupee I have highlighted the different aspects of this problem. The Indian economy is at crossroad today. The Indian rupee had depreciated 20% since January and one of the worst performing currencies in the emerging markets. In this report first of all the different factors upon which a currency’s value is depended are explained such as demand and supply, market sentiments, speculations, debt and fiscal policy, interest rates etc. There are various reasons because of which Indian Rupee depreciated. Major reasons such as volatility in market rates, increase in crude oil prices and its consumption, increased imports, poor management of CAD are playing actively in depreciating Indian rupee. As there are two sides of every coin. There are winners and losers in this case also. Broadly talking that whoever is paying dollar is loser and receiver of dollar is winner. Falling rupee value affected different sectors of economy in different way but if want to take a wide view, it is having negative impact on economy’s every sector. But we should not lose hope. In today’s volatile world...
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...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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...Intrinsic Concomitantly, Attenuate FALL OF THE RUPEE By Dr. Ishrat Husain Published in “ Dawn” on September 25, 2013 WHY is the Pakistani currency depreciating so rapidly vis-à-vis foreign currencies? How can this trend be arrested? What is the future outlook for Pakistan’s currency? These questions must be addressed in a dispassionate manner. Economic theory has many explanations for relative currency movements. The simplest one is that if country X records the inflation rate at 10pc per annum while country Y’s is only 2pc, the bilateral exchange rate of country X should result in depreciation of 8pc vis-à-vis country Y. Hardly any country has economic ties with only one country. Therefore, a trade-weighted exchange rate is used where weights correspond to the relative share in trade with each country in a given basket. The US dollar dominates the multilateral basket as oil payments and other trades and services are settled in US dollars. Given that the latter is the dominant currency, the relative inflation differential between the US and Pakistan becomes a significant determinant of exchange rate movements. Trade is not the only component of foreign exchange transactions. Workers’ remittances now equal more than 50pc of merchandise exports. Current account balances should be examined for explaining currency movement. A surplus current account implies Pakistan has become a net exporter of capital to the rest of the world. It can either...
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...The Rupee shortage has emerged as a major issue due to the recent increase in demand for Indian Rupees to meet transactions related to trade in goods, services and capital and financial transactions. This is not surprising since Bhutan imports most of what it consumes from India, including construction workers. There is also a huge outflow of Rupees annually on education, health, pilgrimage and other travel related expenses as well as remittances out of the country. To meet the increasing demand for Rupee, the Royal Monetary Authority (RMA) had to resort to purchase of Rupee through the sale of 200 million US dollars from international reserves in December 2011 and as the INR became acute again, by July 2012 Bhutan’s borrowing stood at INR 11.6 which includes INR3.6M from State Bank of India, INR 6M from Government of India and 2M from Druk Punjab Bank. The present Rupee shortage in the country can be attributed to two main factors (i) rise in aggregate demand; and (ii) limited supply. The increase in aggregate demand has led to surge (increase) in imports as the domestic production capacity is unable to support the demand. On the supply front, the earnings from electricity exports to India remain Bhutan’s single largest export item, followed by exports of processed minerals like ferrosilicon, calcium carbide, cement, etc. Demand factors Major imports Major imports include fuel, vehicles, heavy earthmoving equipment, industrial raw materials, food items and other...
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...Rupee Depreciation and Impact on the Economy (Dr. Nikhil Saket, Senior Assistant Secretary, ICAI, New Delhi) Introduction Depreciation refers to a fall in the value of the domestic currency which is caused by the demand for foreign currency exceeding its supply in the market. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with those of the world price. With the liberalizations and globalization of the economy in recent years, imports are bound to increase. The lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Again with trade having become an important element of the new strategy of growth. India got freedom from British rule on Aug 15, 1947. At that time the Indian rupee was linked to the British pound and its value was at par with the American dollar. There was no foreign borrowing on India's balance sheet. To finance welfare and development activities, especially with the introduction of the Five-Year Plan in 1951, the government started external borrowings. This required the devaluation of the rupee.- After independence, Indian choose to adopt a fixed rate currency regime. The rupee was pegged at 4.79 against...
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...Rupee heading for 60? It is difficult to stop the slide The Indian rupee is making headlines today, but mostly for the wrong reasons. Its value has been falling against the US dollar steadily and since the beginning of 2012, it has fallen 23 per cent, closing at a record low of Rs 55.39 on Tuesday. The worrisome fact, however, is that no one has any inkling, the government and the Finance Ministry the least, as to how deep the rupee will fall and how long will the downturn last? Research units of some banks have already predicted that the rupee may soon touch 60 to a dollar. About a month ago when the rupee was at 48, such predictions would have looked preposterous, but not anymore. Worst, neither the Finance Ministry nor the Reserve Bank of India (RBI) can do much to stop the fall. There are several reasons behind this pessimistic view. The most important factor is that India’s deficit in foreign trade – excess of imports against exports – has ballooned to an all time high of $185 billion in 2011-12, a whopping 56 per cent more than $119 in 2010-11. Similarly, the import bill for gold and silver was at $60 billion, the second largest item in the basket. Our imports went up by 32 per cent in 2011-12 to Rs 489 crore, our exports at Rs 304 crore were higher by 21 per cent. Since the financial turmoil in Europe has resulted in severe demand contractions in many European countries, a major destination for Indian exports, India’s total export earnings, experts believe...
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...Depreciating Rupee: Introduction: Depreciation refers to a fall in the value of the domestic currency which is caused by the demand for foreign currency exceeding its supply in the market. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with those of the world price. With the liberalizations and globalization of the economy in recent years, imports are bound to increase. The lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Again with trade having become an important element of the new strategy of growth. As per the basic laws of economics if the demand for USD in India exceeds its supply then it’s worth will go up and that of the INR will come down in that respect. It may be that importers are the major entities who are in need of the dollar for making their payments. Likelihood here could be that the Foreign Institutional Investors are retreating their investments in the country and taking them elsewhere. This can create a shortfall in supply of the dollar in India. This state of affairs can only be addressed by exporters who can bring in dollars in the system....
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...Depreciation of the Rupee – Efficacy of steps taken by the RBI to arrest the slide of the currency The million dollar question that has kept analysts and market experts guessing for quite some time now. Will the Rupee stop its free fall? Will it head further south? No one has an answer to this question at the moment. However, it is worthwhile looking at the measures taken by the Reserve Bank of India in this context and mull over what could be done to stem the fall of the currency. Here is a chronological series of measures taken by RBI since November 2011 to shore up the currency. Sl No. Timeline Measures taken by RBI 1 November 23. 2011 ECB raised for Rupee outlays to be brought in immediately 2 November 23, 2011 Increase in all-in-cost ceiling for ECB 3 December 16, 2011 Deregulation of interest rates on NRE and NRO Accounts 4 May 4, 2012 Deregulation of ceiling rate on Export Credit 5 May 4, 2012 Increase in interest rate ceiling on FCNR(B) Deposits 6 May 10, 2012 50% of balances in EEFC Accounts needs to be converted forthwith into rupees and in respect of future earnings, an exchange earner is eligible to retain only 50% 7 June 25, 2012 Limit for FII investment in G-secs increased by USD 5 Billion ECB availment for repayment of outstanding Rupee loans towards Capital expenditure The above measures are discussed in detail below: 1) ECB raised for rupee outlay should be brought in immediately The...
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...weak rupee. But, sectors such as software services and pharma, with major export revenues, will benefit, though the extent of gains at the net profit level will hinge greatly on their foreign exchange hedging policies. Ads by Google • New Launch Villa Project3.5 & 5.5 BHK Luxury Villas in Pune Your island of Peace 2.5cr onwards Gera.in/Isle_Royale_Villas_Bavdhan • HDFC Life™ Term PlanPremium Starts@Just रु 2000/yr. No Medicals upto 75L Cover* Buy Now www.buyhdfcslonline.com The ET Intelligence Group analysed the impact of a weak currency on select sectors. Pharma: Most companies in the sector will gain from the rupee's fall, since a substantial proportion of their revenues comes from exports. A strong US dollar and yen will boost net sales and operating margins. Gainers: The major gainers will be Dr Reddy's Lab, Sun Pharma, Lupin, Glenmark, Wockhardt and Cadilla Healthcare as they derive significant earnings from overseas markets. Analysts reckon that with every Rs 1 movement, the earning per share of these companies will change by 1-2%. For Cipla, which focuses mostly on the domestic market, rupee's fall could be largely neutral. Aurobindo Pharma and Jubilant Lifescience may not gain much since they have huge foreign borrowings of up to $600 million (about Rs 3,600 crore). Software: The operating margins of software service exporters tend to go up by 30-35 bps when the rupee falls by 1% against the US dollar. What may limit the positive impact of a weak rupee on...
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...How To Feed A Billion. And Why It Pays Shoma Chaudhury | Aug. 30, 2013, 2:19 AMArticle views - 186 The Food Security Bill is not a spend; it is an investment, crucial for India’s future and growth On 26 August, after months of wasted sessions, the Lok Sabha finally passed a historic legislation: the Food Security Bill . Many Indians woke two days later to headlines that the rupee had nosedived and the Indian markets had been “food poisoned”. It was a smart phrase. It captured the horror industry and what investors feel about the Bill. But it also epitomised the damaging hysteria and misinformation around it. It captured one of India’s most harsh dividing lines. In the summer of 2012, I travelled with economists Jean Drèze and Reetika Khera through some of Uttar Pradesh ’s most impoverished districts. They were on a fact-finding mission, going door-to-door in the searing sun, asking people whether they had enough to eat and whether the government’s Public Distribution System (PDS ) reached them. It was a deeply humbling experience. In hut after hut, one was confronted by the sheer absurdity of the Indian situation. In some of the country’s most forsaken landscapes — dust and bare scrub for miles, not even the possibility of employment anywhere — destitute, bone-thin families produced their pink and white ration cards with utter bewilderment. The first, a BPL card — below poverty line — entitled them to rice, wheat, and some sugar. The second, an APL card — above poverty...
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...Economics 1,( BUS 121) Graded project number (05047700) The economic development in India followed socialist -inspired policies for most of its independent history, including state-ownership of many sectors; India’s per capita income increased at only around 1% annualized rate in the three decades after its independence. Since the mid-1980s, India has slowly opened up its markets through economic liberalization after more fundamental reforms since 1991 and their renewal in the 2000s, India has progressed towards a free market economy In the late 2000s, India's growth reached 7.5%, which will double the average income in a decade. Analysts say that if India pushed more fundamental market reforms, it could sustain the rate and even reach the government's 2011 target of 10%.States have large responsibilities over their economies. The annualized 1999–2008 growth rate for Tamilnadu (9.9), Gujarat (9.6%), Haryana (9.1%), or Delhi (8.9%) were significantly higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (6.5%). India is the tenth-largest economy in the world and the third largest by purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 140th in the world or 129th by PPP. The economic growth has been driven by the expansion of services that have been growing consistently faster than other sectors. It is argued that the pattern of Indian development has been a specific one and that the country may be able to skip the intermediate...
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...International Trade & Finance life and economy of india The flag of India has three equal horizontal bands of saffron, white, and green with a blue chakra centered in the white band. The orange in the flag represents courage and sacrifice. The white represents truth, purity, and peace. The green represents faith, fertility, and chivalry. The blue chakra emblem is the Ashoka Chakra which is the Wheel of the Law. India shares borders with Bangladesh, Bhutan, Myanmar (Burma), China, Nepal, and Pakistan. It also is bordered by the sea on the west, south, and east. India is currently home to about 1.13 billion people, representing a full 17% of the earth’s population. India, being a vast country does not fit into any one zone and occupies a large area of South Asia. It can be divided mainly into four climatic zones namely Alpine, Subtropical, Tropical, and Arid. Though divided into different climatic zones, India seems to be unified by primarily four seasons- winter, summer, advancing monsoon, and retreating monsoon. This cycle of seasons has been disturbed due to uncontrolled industrialization and other developmental activities resulting in drastic changes in climate. This has lead to climatic disasters such as drought, landslides, floods, and global warming. The unchecked cutting down of trees indirectly leads to landslide and drought. Annual floods have become part of life in many regions of India. The diverse climate...
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...ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA Acquisition and Transfer of Immovable Property in India A person resident outside India who is a citizen of India (NRI) can acquire by way of purchase, any immovable property in India other than agricultural land/plantation property/farm house. He can transfer any immovable property other than agricultural or plantation property or farm house to: a) A person resident outside India who is a citizen of India or b) A person of Indian origin resident outside India or c) A person resident in India. He may transfer agricultural land/ plantation property / farm house acquired by way of inheritance, only to Indian citizens permanently residing in India. Payment for acquisition of property can be made out of: i. Funds received in India through normal banking channels by way of inward remittance from any place of India or ii. Funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the regulations made by Reserve Bank Of India from time to time. Such payment can not be made either by traveller’s cheque or by foreign currency notes or by other mode than those specially mentioned above. A person resident outside India who is a person of Indian Origin (PIO) can acquire any immovable property in India other than agricultural land / farm house / plantation property:i. By way of purchase out of funds received by way of inward remittance ...
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