WHY INDIAN RUPEE IS FALLING CONSTANTLY?


Exchange rate is the value of  currency of one country verse the value of currency of other country. Exchange rates are believed to be a free floating system according to the demand and supply of the market. This theory cannot be considered as a standard one pertaining to all countries. While the value of currency of some countries remain stable irrespective of any economic downturn, in some other countries the value falls nose down contrary to the fair economic growth. Under no circumstances the currency of some country crash the way it does in another country. Even when nothing adverse effects some currency keep crashing. As such it can be safely concluded that mere fluctuations in the market is not the sole factor that determine the exchange rate. However, it can be attributed to certain extent to the demand and supply theory of currencies concerned. If at all it happens it can on only be a temporary phenomenon. Further to this, the change in the value should only affect the concerned countries. The best example for this statement is the exchange rates of the following currencies. Major factors said to be causing the exchange fluctuations are, countries economic performance, outlook for inflation, interest rate differentials, capital flows etc. In fact these put together or some such other things do not become the mere factors that influence the exchange rates of currencies between two or more countries.  There must be other forces too. That is to be found.

The exchange rate of Indian rupee with US dollar from 1947 to 2021 is given below.

1947 - 03.30
1949 - 04.76
1966 - 07.50
1975 - 08.39
1980 - 07.86
1985 - 12.38
1990 - 17.01
1995 - 32.43
2000 - 43.50
2005 - 43.47
2010 - 46.21
2015 - 62.30
2016 - 66.56
2017 - 64.27
2018 - 64.80
2019 - 70.85
2020 - 70.96
2021 - 73.26
(Apr 1)

As per the above chart Indian rupee has fallen from 3.30 in 1947 to 73.26 in 2021. Whatever may be the reasons given the rupee has certainly deteriorated for the past 74 years irrespective of the growth of our economy.

GBP to INR

1947 - 13.33
1966 - 17.76
1988 - 24.75
1995 - 51.17
2000 - 67.99
2005 - 80.15
2010 - 70.65
2015 - 98.00
2021 -101.47
(Current)

Recent exchange rate between USD and GBP

1 USD =GBP
2009 - 0.6284
2010 - 0.6192
2011 - 0.6406
2012 - 0.6449
2013 - 0.6156
2014 - 0.6033
2015 - 0.6418
2016 - 0.6779
2017 - 0.8100
2018 - 0.7400
2019 - 0.7842
2020 - 0.7547
2021 - 0.7314

We may also go through the GDP of India
1947  - $37 bn

In bn USD
1980 -  189
1985 -  238
1990 -  327
1995 -  367
2000 -  477
2005 -  834
2010 - 1708
2015 - 2104
2020 - 3258

While comparing the above figures with one another we may find the hollowness of exchange rate adaptation, at least of rupee with dollar and also of rupee with pound. All other countries are following the same thumb rule for fixing the rate of Indian rupee with theirs.

K V George
kvgeorgein@gmail.com




 

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