The Cause And Effect Of Rupee's Downward Spiral

Money & Banking | 28 Jul '22

The Indian rupee has breached the dreaded psychological barrier of 80 per dollar. The rupee has weakened by over 7 percent year to date against the US Dollar and by around 25 percent since December 2014. Added to the record high inflation levels, and increase in GST, the fall of the Indian rupee against the US Dollar is understandably adding to the pessimism for the Indian economy.

In macroeconomics, depreciation of the national currency is not the primary indicator of the state of the economy. The issue is much more nuanced with many interdependent factors at work. Let’s look at the issue holistically by first understanding the rationale for the fall in the rupee, and then considering the impact it has on the economy.

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