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Khakhdia, D. (2013). 180 DAYS TREND ANALYSIS OF INDIAN RUPEE AND US DOLLAR. PHILICA.COM Article number 399.

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180 DAYS TREND ANALYSIS OF INDIAN RUPEE AND US DOLLAR

Devendra Khakhdiaunconfirmed user (Management, Delhi University)

Published in mani.philica.com

Abstract
Abstract:

Every currency has its own value in international market. Indian rupee isn’t considered as world accepted currency in mediator of every transaction. So in international transaction rupee isn’t accepted widely. To know the actual value of Indian rupee comparison with dollar is necessary. In this article it is tried to find out 180 days rupee dollar trend. Reasons for depreciated Indian rupee value, it’s implications on economy, industry and general public and remedies to come out of this adverse depreciated rupee situation.

Key words: Indian Rupee, US dollar, depreciated currency, appreciated currency

Article body


Introduction:

Rupees value has been depreciated year by year in comparison of us dollar. Indian rupee Value can be measured with the simple formula that how much rupees we must spend to buy one us dollar. If we have to pay more Indian rupees then rupees value is depreciated or devaluated. If we can buy dollar with less rupees then rupees value is appreciated in international market. In last 180 days analysis over here. We will see the depreciated Indian rupee value. What are the reasons for the devaluation of rupee that We will discuss over here. There are major implications of devaluated rupee on the economy, industry, and society. So, how devaluation of rupees affects all these components that we will discuss. What are the steps taken by RBI and what steps should be taken in future are discussed over here.

Objective of study:

1. To understand the actual value of the Indian rupee against US dollar during study period of 180 days.

2. To know the reasons of continuous downtrend of Indian rupee value against dollar.

3. To know the effects of depreciated Indian rupee on economy and industry.

4. To know the effects of depreciated Indian rupee on day to day life products expenses of the society.

5. To know that who are beneficial or non-beneficial from this depreciated rupee effect.

6. To know the remedies to overcome this situation is also important objective.


Scope of study:

In this article the study scope is limited to only Us dollar V/s Indian rupee and effect on Indian economy.


Study period:

The trend analysis study period is 180 days of February to august.

Analytical Tool:


In this study "TREND ANALYSIS" technique is used for study.


Sources of data:


In this study data is taken from secondary source like News Paper, Website, Financial periodicals, financial magazines & books etc…

 

Meaning of Indian rupee depreciation:

Rupee depreciation means that rupee has become less valuable with respect to dollar.

For example, 1 USD = Rs 60 now. One year ago it was Rs 50.

If the demand for the dollar is higher than its supply, the Rupee depreciates.



Trend analysis of 14th February to 12th august: Indian rupees VS US dollar:

 

Analysis:




 

Month



Minimum



Maximum



Average




February



53.8675



54.4493



54.21562




March



53.8961



54.9903



54.41652




April



53.8961



54.7942



54.34116




May



53.6573



56.4966



54.93724




June



56.5145



60.3742



58.24622




July



58.996



60.7615



62.96158




August



60.7149



61.319



60.96838




In 180 days analysis it can be found that rupees depreciated day by day continuously and US dollar continuously appreciated. Minimum monthly value of Indian rupee is depreciated from 53.8675 (February) to 60.7149 (august) per dollar.  Maximum monthly value of Indian rupee is depreciated from 54.4493 (February) to 61.319 (August) per dollar. Average of monthly value, Indian rupee is depreciated from 54.2156 (February) to 60.9683 (August) per dollar.



Reasons of Indian rupee devaluation and depreciation:

1. The economic situation of world is very volatile. People are worried about the safety of their investments. Because of risk aversion on the part of people, US Dollar regained its place as a Safe Haven. People still believe that the US Dollar is much safer than any other currency in the world and hence are accumulating the US Dollar.

2. The reason behind the rupee's recent weakness is the heavy selling of equity by foreign investors.

3. Day by day increment demand of crude puts tremendous stress on the Indian Rupee. India has to import a bulk of her oil requirements to satisfy local demand.

4. The demand of dollars increased because crude price increases day by day and its consumption also increases day by day. All countries of the world have to pay import bill of crude in dollars mostly.

5. US Federal Reserve chairman barnanki has shown signs to end their stimulus package making the dollar stronger against the other currencies including the Indian rupee, at least in the short term.

6. The reason behind the rupee's recent weakness is the heavy selling of debt by foreign investors.

7. The main reason causing the rupee to fall is the immense strength of the Dollar Index, which has touched its three-year high level of 84.30. The record setting performance of US equities and the improvement in the labour market has made Americans more optimistic about the outlook for the US economy.

8. The fact that the Euro zone is in a recession is just another reason why investors are snapping up dollars.

9. Most of India's major trading partners are under a severe economic crisis. This has significantly impacted Indian exports because of reduced demand.

10. India continues to record a current account deficit of around 4.3% because of more imports than the exports. It leads to depreciating the rupee value.

11. The Reserve Bank of India has, so far, responded to the depreciating rupee with minimal intervention in the market. One of the reasons is that country's foreign exchange reserves of $300+ billion may not be enough to defend the rupee.

12. The average rate of interest in India has been significantly higher than in international market encouraging Foreign Institutional Investors to borrow in foreign markets where interest rates are lower. Thus demand of rupees decreases.

Effects of depreciated Indian rupee on economy:

1. Exporters benefit from a rupee depreciation while importers have to suffer in payment of orders which are not hedged.

2. Due to descending flow of rupee, Oil minister was forced to increase petrol, diesel, CNG, PNG prices again and again.

3. Apart from oil, technological goods prices of other imported commodities like metals, gold etc. will also rise pushing overall inflation higher.

4. Television, Refrigerators, Laptop, Washing machines will be more costly.

5. With the depreciation of the Rupee, the cost of living goes up substantially.

6. Home loans, Vehicle loan, Consumer loan will be more costly.

7. The depreciating rupee has serious effects on the external debt figures of the nation.

8. As Indian rupee continuously in down word trend leads to gain in IT companies including BPOs, call centres outsourcing, medical transcription outsourcing, and Indian content writers, especially Indian publishers who also earn in terms of dollars.

9. Companies whose raw material majorly imported have to increase their finished good prices. Such companies just because of higher finished goods prices are not able to compete in international trade again leads to less export and depreciation of Indian rupee value. (Example: Electricity cost goes up because of coal import)

10. Even if prices of global oil and commodities decline, the Indian consumers might not benefit because of continuous depreciation of Indian rupee.

11. Exchange rate risk also drives away foreign investors which in turn depreciates the local currency, business growth rate and GDP.

Remedies:

1. Depreciation of the rupee with respect to the dollar has made Indian products competitive in the global market. Hence increasing the exports is viable option for the Indian companies. More forex reserve helps to build Indian rupee stronger.

2. India needs to reduce dependence of the external borrowings to increase demand for its currency.

3. Crude oil and vegetable oils are the two major commodities in which domestic consumption demand is largely met through imports. India needs to aggressively invest in biofuels to reduce dependence on fossil fuels. This is a long term straegy. Further in the case of vegetable oils, India with its vast agricultural land should promote growing oil seeds which can lower its vegetable oil import bill.

4. Import duty should be increased by government on luxurious items. Recently Government has increased gold, silver, and platinum import duty from 8% to 10%. This is appreciable step.

5. Repo rate should be increased to decrease excess liquidity of market. This is temporary step to give support to Indian rupee. (Recently RBI increased repo rate to 10.25% from 7.25%.

6. Government should decrease their unnecessary expenses and should divert this fund in productive manner.

7. Government should formulate encouraging business policy to attract new domestic and foreign entrepreneurs. (Like tax relief, basic infrastructure facilities etc

Limitations:

1. Study period is limited to 180 days.

2. This study was limited only to the US dollar V/s Indian rupee. As a result it has a narrow outlook of overall effect on economy of India.

3. The study is based on the secondary data. So limitation of the secondary data will remain with the study

4. Every person has its own thinking and believes so in this work may include personal bias.

5. It was very difficult to incorporate all the data in the report.

Conclusion:

It is very difficult to increase the value of Indian rupee by Government of India and Reserve bank of India,. Because major factors that affect Indian rupee value are global factors. India government and RBI can't change global situation. They can only help Indian rupee by taking domestic economy level steps which are not sufficient. So it can be concluded that both are not able to control Indian rupee value fully.


References:

www.google.com

www.wikipidia.com

www.xe.com

www.onada.com

www.uktradeinfo.com

www.x-rates.com

www.imf.org

www.rbi.org.in

www.dgft.gov.in




 









Information about this Article
Peer-review ratings (from 2 reviews, where a score of 100 represents the ‘average’ level):
Originality = 162.50, importance = 162.50, overall quality = 125.00
This Article was published on 22nd December, 2013 at 05:48:21 and has been viewed 8353 times.

Creative Commons License
This work is licensed under a Creative Commons Attribution 2.5 License.
The full citation for this Article is:
Khakhdia, D. (2013). 180 DAYS TREND ANALYSIS OF INDIAN RUPEE AND US DOLLAR. PHILICA.COM Article number 399.


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1 Peer review [reviewer #62281unconfirmed user] added 29th January, 2014 at 10:58:29

Researcher has selected very good topic. Current Indian economy is not very good. There is continuous depression of India rupee. Such a trend analysis,remedies,findings , suggestions will be help full to each and every citizen.

Originality: 6, Importance: 6, Overall quality: 5


2 Peer review [reviewer #95407unconfirmed user] added 29th January, 2014 at 11:06:03

Excellent attempt has been made by researcher in research. This study is important to so many people which directly and indirectly attached with financial market. Trend analysis, suggestions and findings will be help full. All over work formulation is very good.

Originality: 7, Importance: 7, Overall quality: 5




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