Currency depreciation

Currency depreciation

Subject: Economy

Section:

Why in the news?

The rupee’s depreciation against the US dollar may hold little upside for India as exports seem unlikely to benefit.

Causes:

• Global supply chain constraints -Lockdowns in China aimed at containing the Covid spread have slowed operations at key ports and affected global supply chains.
• Fall in currency values of competitors-Most of our competing export nations are in South Asia or Southeast Asia and their currencies have also depreciated
• High commodity prices and inputs

Impact of depreciation:

• Rise in import and current account deficit
• The depreciation of the rupee is also set to make outward remittances, 

including those to students in the US, more expensive.