What is the impact of falling rupee on Indian economy? How will it affect investors, consumers and borrowers?

Depreciating rupee value has been a hot topic of discussion on business news channels and financial newspapers for some time now. Any movement of domestic currency vis-à-vis the US dollar impacts the Indian economy as well as Indian consumers in more ways than one. Let us discuss the reasons for rupee depreciation and its impact.

Domestic transactions are settled in Indian rupees (INR), whereas international transactions are usually settled in a foreign currency. The US dollar (USD) is an internally accepted foreign currency for the settlement of such transactions. Between January 2018 and June 2022, the exchange rate moved from INR 63.50 to nearly INR 78.25 per 1 USD. Each dollar getting more rupees in exchange is nothing but rupee depreciation, which causes a fall in the purchasing power of the Indian rupee. The relative strength of economies, international geopolitical events, inflation, and interest rate levels in both countries are major reasons for relative currency appreciation/depreciation. Recently, we are witnessing higher fluctuations in the foreign currency market due to global events like the Russia...

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