The value of the Indian Rupee falls, and this leads to even more selling. When foreign investors withdraw their money from India, there is significant demand for the US dollar.
High FDI flows have given stability to the Indian Rupee. Learn how to mange your money & create wealth, Download your FREE eBook now Capital Flowsįoreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) can affect the value of the Indian Rupee. In the same way, when crude prices decline, the INR appreciates because India imports around 80% of her crude oil and pays for those imports in USD. When the price of crude oil rises, the INR depreciates. The price of crude oil has always had a significant impact on the value of the INR against the USD. Let’s take a closer look at the factors that have contributed to the depreciation of Indian Rupee against the US dollar: Crude oil prices Besides, India had weak growth of 0.8% at that time, so it was not possible for the INR to have the same value as the USD. In 1947, India was not engaged in trade and had no external borrowings, so it was not possible for INR 1 to be equal to USD 1.
India was unable to pay for imports and the only option left was to borrow money abroad. The crisis depleted her foreign currency reserves, and the INR became unacceptable overseas. In 1966, USD 1 was equal to INR 4.76, and after the devaluation, USD 1 was equivalent to INR 7.50.ĭevaluation happened because India was facing her first big financial crisis. The INR was devalued in 1966 and pegged to the USD. Before the USD became the standard global currency, we measured the INR against the British Pound. It’s a myth that INR 1 was worth USD 1 when India gained her independence on August 15, 1947. Get insights on your personal finance by a Registered Investment Advisor. Its FREE, but spots are limited… Register now.
The INR is now close to the 70/USD level. The Indian rupee has been depreciating against the US dollar since 1966, and Here we shall look at some of the reasons why the Indian Rupee (INR) has been depreciating against the US Dollar (USD).
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