Major Factors Contributing to Rupee Depreciation

Varahi media.com online news,March 25, 2025: The depreciation of the Indian Rupee has stabilized over the past few days, showing a slight recovery against the US Dollar. This development comes as a relief to financial analysts. However, rupee depreciation is not a new phenomenon. In 1947, the exchange rate was ₹3.30 per US dollar. By 1980, it had dropped to ₹7.80, further declining to ₹17.01 in 1990 and ₹43.50 in 2000. In 2010, the rupee stood at ₹46, and by 2020, it had reached ₹71. From 2021 onward, the exchange rate continued to rise, recently touching ₹87 per dollar.

Impact of Rupee Depreciation on the Economy

The value of the rupee fluctuates due to multiple economic and global factors, making it a subject of political debate. While opposition parties often blame the government for the rupee’s decline, history shows that India’s economy has continued to grow despite currency depreciation. A falling rupee does not necessarily indicate a weak economy, as exchange rates depend on international market trends.

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A depreciating rupee benefits Indian exporters by making their goods and services more competitive in global markets. This can lead to increased exports and job creation. IT service companies also gain a competitive edge internationally. Additionally, foreign tourists find travel in India more affordable, boosting the tourism sector. However, the downside includes higher costs for imports such as petroleum, gold, and foreign education, increasing the financial burden on consumers.

Global Factors Influencing the Rupee

Several international developments impact the rupee’s exchange rate. Policies like US-imposed tariffs on other countries can affect Indian exports. In some cases, countries intentionally devalue their currencies to boost exports, as seen with China. If applied strategically, currency depreciation can support initiatives like Make in India, encouraging domestic production.

On the other hand, countries like Argentina have faced economic crises due to excessive currency devaluation. During the 2001-2002 financial crisis, the sharp fall of the Argentine Peso led to hyperinflation and severe economic turmoil. Hence, managing currency depreciation with a balanced approach is crucial for economic stability.

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No Need for Concern Over Rupee Depreciation

Rather than viewing rupee depreciation as a political issue, the focus should be on strengthening economic policies. Throughout India’s post-independence history, significant currency devaluation has been rare. Therefore, the key priority should be implementing strategies that reinforce the Indian economy and ensure long-term financial stability.