Asked by: Safietou Sajjad
business and finance currencies

Is rupee devaluation good for economy?

Last Updated: 21st February, 2020

Currency devaluations can be used by countries toachieve economic policy. Having a weaker currency relativeto the rest of the world can help boost exports, shrink tradedeficits and reduce the cost of interest payments on itsoutstanding government debts. There are, however, some negativeeffects of devaluations.

Click to see full answer.

Furthermore, does devaluation help the economy?

Advantages of devaluation Exports become cheaper and more competitive to foreignbuyers. Higher exports and aggregate demand (AD) can lead to higherrates of economic growth. Devaluation is a lessdamaging way to restore competitiveness than 'internaldevaluation'.

Secondly, will India devalue its currency? In 1991, India still had a fixed exchange system,where the rupee was pegged to the value of a basket ofcurrencies of major trading partners. As in 1966,India faced high inflation and large government budgetdeficits. This led the government to devalue therupee.

Additionally, how does devaluation affect the economy?

Exports cheaper. A devaluation of the exchange rate will makeexports more competitive and appear cheaper to foreigners. Thiswill increase demand for exports. Also, after a devaluation,UK assets become more attractive; for example, a devaluationin the Pound can make UK property appear cheaper toforeigners.

Why is India devaluing its currency?

India devalued Rupee for the first time in 1966.Devaluation of Indian Rupee in 1966 despite governmentattempts to obtain a positive trade balance, India suffereda severe balance of payments deficits since the 1950s. Because ofall these reasons, Government of India devalued Rupee by36.5% against Dollar.

Related Question Answers

Mica Rudd


What are the benefits of a weak currency?

A weak currency may help a country's exports gainmarket share when its goods are less expensive compared to goodspriced in stronger currencies. The increase in sales mayboost economic growth and jobs, while increasing profits forcompanies conducting business in foreign markets.

Timoteo Chinchon


When did China devalue its currency?

2015 Devaluation
Since 2005, China's currency had appreciated 33%against the U.S. dollar, and the first devaluation markedthe most significant single drop in 20 years.



Does devaluation cause inflation?

Generally, a devaluation is likely to contributeto inflationary pressures because of higher import pricesand rising demand for exports. However, the overall impact dependson the state of the economy and other factors affectinginflation.

Jackie Irazagorria


How can a country devalue its currency?

4 Answers. Typically, a devaluation is achievedby selling the domestic currency in the foreign exchangemarket and buying other currencies. As in any competitivemarket, an increase in supply will cause the price (i.e. theexchange rate) to fall: one Yuan will be worth less thanbefore.

Rehman Binevich


What causes inflation?

Causes of inflation. Inflationmeans there is a sustained increase in the price level. The maincauses of inflation are either excess aggregatedemand (economic growth too fast) or cost push factors (supply-sidefactors).

Rode Sobrero


What is difference between devaluation and depreciation?

Depreciation occurs when the forces of supply anddemand cause the value of their currency to drop. By contrast,devaluation occurs only in countries that do not allow theirexchange rates to float. These countries' governments control theofficial value of their currency.

Maisie Zelinsk


Which currency has highest value in INR?

Highest Currency in the World in 2018 Table format
S.No Currency Value in Indian Rupees
1 Kuwaiti Dinar (KWD) 241.13↑
2 Bahraini Dinar (BHD) 194.15↑
3 Omani Rial (OMR) 190.13↑
4 Jordanian Dinar (JOD) 103.16↑

Buba Indabe


How does inflation affect economic growth?

When prices rise for energy, food, commodities, andother goods and services, the entire economy is affected.Rising prices, known as inflation, impact the cost ofliving, the cost of doing business, borrowing money, mortgages,corporate and government bond yields, and every other facet of theeconomy.

Laudelina Ilyushin


What is balance of payment in economics?

The balance of payments, also known asbalance of international payments and abbreviatedB.O.P. or BoP, of a country is the record of all economictransactions between the residents of the country and the rest ofthe world in a particular period of time (e.g., a quarter of ayear).

Miodrag Lahrsen


What are the effects of devaluation on employment?

A devaluation of the official exchange rate underconditions of less than full employment lowers Q in Equation1, making domestic goods cheaper in world markets. The currentaccount balance increases, increasing aggregate demand and shiftingIS to the right.

Sigita Rief


Can RBI devalue rupee?

Can RBI devalue rupee? - Quora. The RBIand the GoI are just two important players in determining therupee's exchange rate (value). There is, for all intents andpurposes, no limit to the latter — they can“generate” (“print”) any number ofrupees and keep using them to purchase foreignexchange.

Iaia Andreer


Why was rupee devalued in 1991?

In the case of the 1991 devaluation, the Gulf Warled to much higher imports due to the rise in oil prices. In Julyof 1991 the Indian government devalued therupee by between 18 and 19 percent.

Hajnal Urisavel


What was the value of 1 rupee in 1947?

Since India was under British rule Rupee waspegged to Pounds. From 1927 to 1966, it was 13 rupees =1 pound. This arrangement continued until 1966 when therupee was devalued and pegged to the U.S. dollar at a rateof 7.5 rupees = 1 dollar.