January 19, 2016
Why did Rupee Lose its Status?
The economy of the world is lifted by currencies that give strength to hold it and make it strong. The trade of currencies gives the much needed boost to the economies of the world with stocks, bonds, options and commodities being strong with every passing minute. The investments that the businesses are providing, money is contributing a lot to it with buying, selling and losing wealth in the process.
Why is Money an Essential Commodity?
It is the value of a piece of paper, a coin or cards. It has different variations: money of commodity, money for representing, money for authorization, money of the banks. Everything has its value and is exchanged in for money. Money use in commodity relates to barter system apart from that it can be handled properly and quite easily.
Money for representation is a token for notes and coins and can be exchanged for a fixed amount of precious things. Money for authorization is established by the government in form of currency and coins but it is illegal. Commercial money is the cheques, drafts that are associated with banks. It is used to make payments for goods and services.
On what factors do the value of currency depends?
The value of currency depends on many factors. Some of which are:
- Levels of income
- Balance of payments
- Rate of interest
- Rate of growth
- Foreign exchange
- Banking Capitals
These factors make the currency increase its value and maintain its status in the reserves of the banks.
Why did Rupee fall?
Indian rupee is falling since 1980, with the fall of Purchasing Power Parity (PPP). The inflation led rupee into downfall with a sudden negative impact. The present poke on rupee was rather sharp and it added against the value of the dollar in exchange with rupee. The giant banks have started selling Euros and buying Dollars, the latter went against all major currencies especially Rupee.
The start of the financial year had seen rupee depreciating and losing a great sum. Although The Reserve Bank of India has stopped its further fall and is now standing as a barrier but in a small way. RBI is only going to appear in between when it feels it must, but nobody really thinks that the problem of Euro would be solved.
People losing confidence over banks especially due to banks security failure! SBI recent security failure is also a reason where its loose it shape.
Rupee became weak due to the Euro crisis and it has got nothing to do with the national economy. The global issues got to have an impact on the Asian markets and Rupee became vulnerable this time.
Impact of the fall
The fall in the value of rupee has created problems for the economy. It had lead to inflation and the prices of all the materials are going to hike. Government has to pay more for the raw materials only because rupee lost its status. Import and export will be expensive now, the EMI for the loans are going to fly high, but the stocks of the IT companies and export units are supposed to perform better.
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