Current depreciation of rupee: Justified or not?
Keywords:
Current depreciation, currency, investment opportunities, financial indisciplineAbstract
Stable currency, for any country, is an important indicator of economic stability. The value of a currency viz-a-viz other currencies is an indicator of its competitiveness in the international market. It is an important economic parameter which affects trade balance between countries and influence investment opportunities. The volatility in the exchange rate of a currency is a sign of some serious economic problem which requires immediate redressal. Currency depreciation results as a consequence of weak exchange rate system requiring correction in balance of payment deficit. Depreciation is undertaken when it is necessary to protect the country from liquidity crunch and economic hardship. In cases where such volatility and downward slide of currency has happened consistently over a long period of time, then it is a sure sign of economic mismanagement, financial indiscipline and weak economic fundamentals.
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