RUPEE DEPRECIATION AGAINST THE DOLLAR AND ITS IMPACT ON INDIAN ECONOMY

India being a developing economy with high inflation, depreciation of the currency is quite natural. Depreciation of rupee is good, so long as it is not volatile. A random depreciation that we have seen in the last few months is bad and it has hurt the economy. India’s domestic-focused economy has continued to outperform peers, with gross domestic product (GDP) expanding at 8.2 per cent in the June quarter – the fastest pace in a couple of years. Still, currency-market volatility and rising global interest in safe-haven assets could outweigh broader growth in the short run. India got freedom from British rule on Aug. 15, 1947. At that time the Indian rupee was linked to the British pound and its value was at par with the American dollar. There was no foreign borrowing on India’s balance sheet. But from fast couple of months the rupee value slump to 73 to a dollar by 5thOctober shows volatility of the exchange market. In this background the present paper made an attempt to examine the recent trends and reasons for rupee depreciation, know the Effects of depreciation on Indian economy and to assess the impact of depreciation on investment.