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What Do You Understand by Devaluation of Rupee? - Economics

Short Note

What do you understand by devaluation of rupee?

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Solution

Devaluation of Rupee refers to the fall in the value of rupee in terms of foreign currency. Specifically, it implies deliberate official lowering of the value of the country's currency with respect to the foreign currency. Devalutaion prevails under the fixed exchange rate regime. This implies that value of rupee has fallen and the value of foreign currency has risen. It means that now (after devaluation) one US$ can be exchanged for more rupees. This encourages exports and discourages imports as the former is cheaper now for foreign countries and the latter is expensive for Indians.

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APPEARS IN

NCERT Class 12 Economics - Indian Economic Development
Chapter 3 Liberalisation, Privatisation and Globalisation: An Appraisal
Exercise | Q 5 | Page 53
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