Monday, January 2, 2012

Rupee Depreciation: There are lessons to be learnt

Rupee, our very own Indian currency, has witnessed a literal free fall especially in the past few weeks. The rupee slid 15.8% in 2011 and by 0.2% in the last week of 2011 to 53.065 per dollar in Mumbai, according to data compiled by Bloomberg. According to reports, this currency weakened the most in Asia this year. So, what has led to such weakening or should I say, depreciation of the rupee and what does it entail for the Indian economy? Let’s explore this interesting and crucial topic that has the potential to shape the future of Indian economy. After all, an appreciating currency makes a country's exports more expensive and imports cheaper in foreign markets whereas the reverse makes a country's exports cheaper i.e. more attractive and its imports more expensive in foreign markets.