Winning Bizness Desk

Mumbai. The decline in the Indian rupee continues and it seems unstoppable as of now. At present, the rupee has slipped to a record low against the dollar and has reached close to 80. Weaker rupee has made study and travel abroad expensive. Apart from this, due to increase in the price of petrol and diesel in the coming days, inflation may also increase.

India imports 80% of its crude requirement

This is because India imports about 80% of its crude requirement. Most payments for imports have to be made in dollars. If the rupee weakens against the dollar, then more rupees will have to be spent. If more rupees are spent for crude, then its effect will be seen in the prices of petrol and diesel and transport will also become expensive. This will make other things more expensive and inflation will increase.

Foreign travel and study costlier

Fall in the rupee means traveling and studying in America has become expensive. To understand this in simple terns, suppose that when the value of rupee was 50 against the dollar, then Indian students in America used to get 1 dollar for 50 rupees. Now for 1 dollar, students will have to spend 80 rupees. Due to this, from fees to living and food and other things will become expensive.

How is the value of a currency determined?

If the value of any other currency decreases in comparison to the dollar, then it is called falling, breaking, weakening of the currency which is also known as depreciation. Every country has a foreign currency reserve from which it conducts international transactions. The effect of decrease and increase in foreign reserves is reflected on the price of the currency.

Floating rate system

If the dollar in India's foreign reserve is equal to the US rupee reserves, then the value of the rupee will remain stable. If the dollar decreases with us, the rupee will weaken, if it increases, the rupee will strengthen. This is called the floating rate system.