1 Uma C Swadimath, Associate Professor, Centre for Management Studies, Presidency College, Bangalore
2 Prasanna B Joshi, Assistant Professor and Head, Department of Economics, Rani Parvati Devi College, Rani Channamma University, Belgaum
3Dr. R Venkataraman, Professor, Centre for Management Studies, Presidency College, Bangalore
4Research Scholar, Department of Studies in Economics and Co-operation, University of Mysore, Mysore
Online published on 25 October, 2016.
International trade payments are made on the basis of exchange rate. Exchange rate is the rate at which one currency is exchanged for another. Exchange rate reflects on the trade balances of that particular economy. Many countries are facing this currency crisis and India is no different. India is currently facing an exchange rate crisis resulting in rupee depreciation. Exchange rate affects balance of payments. As a matter of fact, balance of payments is an important indicator of a country's trade balance. The present paper is an attempt to understand the causes for fluctuations in the exchange rate and its impact in India. Variations in exchange rates affects not just trade but also investments into the country. The depreciation of rupee against the dollar has resulted in current account deficit. This is because of huge imports of crude oil and gold. Foreign investments in the country have been adversely affected due to depreciating in the value of rupee. This paper also tries to study the measures undertaken both by the fiscal and monetary authorities to combat the exchange rate crisis.
Exchange rate, rupee depreciation, fiscal and monetary policies, current account deficit (CAD)
