Don’t delay tough decisions

Value of any currency decreases when its demand decreases. And also, if the demand for US dollar increases, rupee along with many other currencies weak against USD. The rising crude oil prices, higher capital flows, strengthening dollar etc.

Are causing continuous depreciation of rupee to Rs 73.35- the lowest ever. The importers are buying more stock in advance to avoid paying higher price in the coming days, demand for dollar is increasing , on the other-side exporters are postponing exports to get more profit as the value of rupee is on constant down-trend. This is increasing Trade deficit (Imports – Exports), which in turn increases Current Account Deficit (CAD).

As a result of this entire process, inflation occurs. When inflation is too high, sales will be dropped affecting country’s economy. Rise in inflation will reduce savings from people. This will negatively impacts country’s economy because savings and investments are extremely important for economic growth. Weak and fluctuating currency will discourage foreign investors from investing in the country. Thereby Foreign Direct Investment (FDI) inflows to India will slow down.