In 2010, the US dollar was equal to 45 rupees. In 2020, it was 74 rupees and as of today it is 96 rupees against the US Dollar. On the one hand, the Indian economy is booming and has a great ranking, reaching up to the 5th largest economy in the world. The governments and people praise and applaud the initiatives taken in India.
Firstly, the currency is a valuable asset which world runs on, but who decides these currency values graph and its ups and downs ?
The answer is, nobody decides the value, it is decided based on supply and demand. The US dollar was finalized as the major trade deal across the world, as it created trust, had most gold reserves and control over the world after world wars. It has one of the best financial institutions and the size and strength of the economy also played a key role. We have 195 countries with 180 different currencies but the US dollar is considered the most trusted one. In exchange for goods from any country, people adopted the US dollar as the major currency trade.
* The factors affecting the currency value are inflation. Whenever the prices go high for goods, then automatically the currency value drops.
* If the government starts importing more goods than exporting things, it would create more challenges in rupee value. As we are dependent on others, the government has to pay more money in dollars. The cash flow moves out rather than coming in. The imports and exports are basically current account deficits.
* Our government has loans and debts, one is external and another is internal debt. The government takes loans for schemes, developments or even imports which create hindrances in currency value.
* Interest rates are another big challenge. If they are high, there is less business, so the financial institutions smartly keep things less to protect the overall impact, but it has an impact on the currency.
Whenever the currency value goes down, our Indian goods and products value gets cheaper outside our country, but whenever we export more goods than import, we will be on a profit side. Having a rupee value going down can create panic and signals towards betterment, but it would also improve more investors, capital flow, job creation from developed nations.
