Indian Rupee vs. Dollar: A Deep Insight

Persistent weakness in the rupee and increasing volatility has reduced the benefits of borrowing overseas. Over the past one year, the rupee has consistently depreciated against the dollar. Since January 2013, the rupee has lost more than 20 % of its value, making it the worst performing currencies in Asia. 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. This paper reviews the likely reasons for this depreciation of the rupee. It also reflects on the policy options to help prevent the depreciation of the Rupee.