Question

What is devaluation? Explain the causes of devaluation of Indian rupee in l997.

Answer 1

Explanation:

Causes of Devaluation in Rupee

Lack of competitiveness/inflation. The long-term decline in the value of the Rupee reflects India's relative decline in competitiveness. In particular, India has a higher inflation rate than its international competitors.

Currency devaluations can be used by countries to achieve economic policy. Having a weaker currency relative to the rest of the world can help boost exports, shrink trade deficits and reduce the cost of interest payments on its outstanding government debts. There are, however, some negative effects of devaluations.