What are the Effects of appreciation or depreciation of Indian rupee with respect to us dollar?
Before I answer the question, let me provide a simple example
relating to exchange rate. For example, if 1 Indian Rupee equals to
2 US Dollars today, after the appreciation of the Indian Rupee it
will equal to 5 US Dollars. ( please understand that I do not know
the exchange rate betwen dollars and Indian Rupee, hence this
example could look weird ). The appreciation means that the Indian
Rupee can purchase more US dollars. If this happens, you can look
at it from the perspective of the buyer and the seller. If you are
a buyer from US and would like to buy things in India, the
appreciation will be disadvantages to you, as you need to use more
US dollars to buy things from India. If it is disadvantage to a
buyer from US, it means a seller from India will be at a
disadvantage, as the price of goods sold to foreigners are now more
expensive. Hence the first conclusion can be drawn, it will be bad
for sellers in India and bad for buyers in US. On the other hand,
an appreciation, means that more US dollars can be exchanged with
the Indian Rupee. This can be good for buyers in India, as now they
have more buying power. If this happens, then it will be good for
sellers in US. Hence, the second conclusion can be drawn, it will
be good for buyers in India and good for sellers in US. It's
important to understand that the above explanation is rather
theoretical. In real life we can argue, the economy consists of
both buyer and seller, and there will be a shift in advantages or
disadvantages when the exchange rate changes. When we consider
buyers and seller, you can expand your thinking and relate to
students, tourists and workers. Students coming to study in your
country, or tourists visitng your country can also be affected. (
use the same analysis on buyer and seller above ). Another
important thing is to consider the economy at hand. And changes in
the exchange rate will also depend on the economy and its
development. Exchange rates are a huge topic in some Economics
topic, and a major topic in International Finance.
(cheong@bgymail.gd.cn)