Falling Value of Indian Rupee Against Dollar

            Introduction:- The Indian Rupee is currently worst performing currency in Asia. It lost its value by almost 12% since the beginning of the year and 17 % for the last three years leading to high prices of goods and services in Indian market and last week it crossed the mark of 72 per dollar.

Reason of Continuous Fall in International Market:-

1.  After a brief lull, crude oil prices have started climbing rapidly to about $75 a barrel.
2. The United States of America is building pressure on its allies to stop buying oil from IRAN.
3. The spike in oil prices has pulled down the Rupee, by pushing up dollar demand.
4. Global Trade War fears triggered USA and China's retaliatory import tariffs have also weakened the rupee.
5. The Chinese YUAN has fallen sharply in the last few seasons.
6. This has triggered a Dollar flight from many emerging economies.
7. The spurt in dollar outflow has pulled down most Asian currencies including the RUPEE.
8. The depreciation of host suggests that there is global factor at play. A slowdown in US money supply growth affects the value of other currencies.

Consequences:

      A weak rupee will lead to inflation, high transport prices, costlier education and services. A weak rupees make imported goods like computers, mobile phones and crude oil costlier. This may prompt companies hike petrol and diesel prices too. Costlier prices and services may lead Reserve Bank of India to raise lending rates to curb inflation. RBI may also keep high interest rates. High interest rates may push up home loans.

      For India it means buyers are now having to sell out more rupees to purchase Dollars.

What Can Be Done?

      Since RBI is the sole supplier of Indian rupee, they can influence the value of it by appropriately regulating its supply. RBI can affect both the money supply and domestic interest rates simultaneously by its monetary policy.

      Today Government of India has announced measures to rescue sliding indian currency's value; the Union Government after meeting with RBI governor Urjit Patel announced the list to arrest sharply declining currency. (Five Steps Announced By Govt. of Indian)

1. Foreign Policy of India Norms Eased:-  In a bid to push Indian Corporates to take masala bond route, the Govt. has exempted all such bond issues untill March 31, 2019, from withholding Tax. This will lead that any depreciation in rupee will not affect the borrower.
2. The second measure is that manufacturing companies borrowing upto $50 million through ECB will be able to do so only for a one-year term as against three-years allowed earlier.
3. The govt will take necessary steps to restrict non-essential imports and increase exports. 
4. Govt said that to attract more foreign portfolio investors(FPI) will be review its corporate bond portfolio.
5. The fifth It said it will review the mandatory hedging condition for infrastructure loans borrowed under the external commercial borrowing (ECB) route. Currently there is no compulsion on borrowers to hedge these loans.