Question

Explain what can be the likely impact of depreciation of the home currency on imports to the country.

Answer 1

The depreciation of the Indian Rupee has caused distress in the Indian market because it makes imported goods more expensive. As a result, imports of foreign goods may decline or become very costly. For example, cloth imported from the US will cost more than earlier due to the fall in the value of the Indian Rupee, making it more expensive and reducing its import.