In last few weeks rupee has touched new lows against dollar. This has worried our political class, the stock markets and RBI. Unfortunately all the effort to control its fall is in vein. Looking at this trend I researched a bit on the how the relation of rupee has been with US dollars since our independence.
As shown in the above graph, there have been 3 time periods when rupee weakened significantly
- Between 1965 – 1967, the rupee to dollar exchange ratio fell from 4.7619 to 7.5
- Again the devaluation of rupee started from 1989, the start of economic crisis. By 2002 rupee had devalued significantly. The exchange ratio went down from INR 16.1987 per US $ to 48.6263 per US $. This also lead to growth of software industry in India.
- The rupee has again started its fall from July 2011, when it was 44.4151 against dollar to the range to 56.5. This is a devaluation of more than 25% in a year and this is certainly not good news. We all have felt the repercussions with increased petrol prices. If this continues it’s going to be bad for India as India is still import oriented. On the other hand this would encourage outsourcing from US to India due to cost leverage.
What are your thoughts on the same?