Causes of Indian Rupee depreciation in 2011.


Causes of Indian Rupee depreciation in 2011

It was Rupees 43.96 against a dollar in the July end.And now for $1 it is Rupees 54.3.

(Look at this chart here)

Rupee hits all time low in this week. Rupee creating the new record against dollar every other day in this week .

This is obviously not the “India Shining” thing. Government is not at all focused as its the season of elections.

It is not the first time for Indian Rupee. In 2008, Indian Rupee faced the devaluation because of oil prices.

Anna Hajare, Mamata Banaerjee and other unknow factors not allowing two Economist brains Pranab Mukherjee and Manmohan Singh to concentrate on Market values.

Not only the current political situation is responsible for depreciation in 2011 but also there are some external factors.

This is the combine effect.

Withdrawal of FII’s

Foreign institutional investor’s withdrawal from domestic economy is the one big reason for this depreciation.
The Greece Crisis and its rescue package made investor to think about their investments. Changes in the finance minister and political leaders (in EURO-ZONE) is also a factor.

Strengthening of Dollars

The Euro-Zone crisis has weakened the Euro significantly against the US Dollar. In other words dollar is getting stronger in the world markets. Obviously the investors are considering US as safe place to invest in. The major areas are Gold, greeback and treasury.

Other Capital Flows

On month by month basis, Foreign Direct Investments (FDI), External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs) recorded a slowdown in Financial year 2011.

Indian Politics

Number of Indian scams distracted governments concentration away from Economy. All these scams make the bad image of India in the global market.

Mr Manmohan Singh may be willing to implement good things for economical reform. But the real power woman Sonia Gandhi do not wish for open economy system.

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