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by Shashwat Sharma
Introduction:
“Why do we fall? So that we can learn to pick ourselves up.”
From Christopher Nolan’s hit Batman Begins, this remains one of the most inspirational quotes,
often giving one strength in hard times. However, that does not seem to apply to the Indian
Rupee as after a gradual fall in its value, the Rupee sank to an all-time low of Rs 80 per US
Dollar on 18th July 2022.
Article:
The US Dollar serves as the world’s most dominant currency, and is hence regarded as the
benchmark for other currencies as it determines their value in the universal market. Hence, the
Indian Rupee is also compared against the dollar to determine its value. Back in 2000, the
Dollar was equal to Rs 44. A little over two decades later, after being down nearly 6% since
January 2022, the value is almost double than that in 2000’s.
Summary
After witnessing a 6% fall in value since January 2022, the Rupee hit an all time low at Rs 80
per USD. The fall in value of the Rupee is mainly due to high crude oil prices. India depends
heavily on crude oil imports to meet its energy requirements. If oil prices are rising, it means the
cost of imports are rising as well. This pushes up the demand for the US Dollar which
strengthens it even more against the rupee. Also, there have been heavy foreign fund outflows
from the domestic markets as the foreign institutional investors have sold shares worth $26.4
billion, which has also contributed to the fall.
Several analysts believe that the Rupee could decline further against the dollar in the
foreseeable future as oil prices rise and the foreign investors continue their sell-off.
However, the RBI is working to stall this fall as it is intervening in all market segments to curb
volatility. The RBI has foreign exchange reserves of almost $600 billion, which it has been using
to protect the rupee and to curb any volatility.
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