The Indian currency i.e. Rupee has once again come to its record all-time low. During trading on Wednesday (5 February), it fell by 25 paise to 87.37 against the US dollar. This is the lowest level of Rupee. Earlier on Monday, it fell by 67 paise to 87.29. Major reasons for the fall of Rupee… 1. Trade deficit: When a country’s import is more than its export, then there is a situation of trade deficit. India’s trade deficit was 37.8 billion dollars (about 3.31 lakh crore rupees) in November and 21.94 billion dollars (about 1.92 lakh crore rupees) in December. This reduces the demand for Rupee and its value falls. 2. Current account deficit: i.e. current account deficit is the difference between trade deficit and import-export of services. If it increases, it can reduce the demand for Rupee. In the last financial year, it was 0.7% of GDP. It is estimated to be 1% in the financial year 2025. 3. Foreign exchange reserves: A fall in foreign exchange reserves can reduce the demand and price of the rupee. According to data till January 24, India’s forex has increased by $ 1.8 billion to $ 629.55 billion (about Rs 55.02 lakh crore) compared to last week. 4. Inflation: High inflation rate can reduce the value of the rupee, as it reduces the purchasing power of the rupee. However, it was 5.22% in December. Inflation rate was 5.38% in November. But this is 4 percentage points more than RBI’s expectation of 2%. 5. Interest rate: If RBI increases interest rates, it can increase the demand for the rupee and increase its price. But if interest rates are reduced, it can reduce its demand and drop the price. RBI can cut interest rates in the policy meeting. US President Trump’s stand on tariffs US President Donald Trump had announced 25% tariff on Canada and Mexico and extra 10% tariff on China on February 1. Later he withdrew his decision, due to which the rupee remained stable yesterday. Trump has threatened to impose 100% tariff on BRICS countries many times. India, Brazil and China are all part of BRICS. Apart from this, Trump has complained about India imposing very high tariff on American products. In such a situation, there was a threat of tariff on India as well. Imported things will become expensive due to fall in rupee The fall in rupee means that import of things will become expensive for India. Apart from this, travelling and studying abroad has also become expensive. Suppose when the value of rupee against dollar was 50, then Indian students in America used to get 1 dollar for 50 rupees. Now students will have to spend 86.31 rupees for 1 dollar. This will make everything from fees to accommodation and food and other things expensive. How is the price of currency decided? If the value of any currency decreases in comparison to dollar, it is called fall, breakage, weakening of the currency. Currency depreciation in English. Every country has a foreign currency reserve, through which it carries out international transactions. The effect of increase or decrease in foreign reserve is seen on the price of the currency. If the dollar in India’s foreign reserve is equal to the rupee reserve of America, then the value of rupee will remain stable. If the dollar decreases with us, then the rupee will weaken, if it increases, then the rupee will strengthen. This is called floating rate system.
