365Telugu.com Online News, March 25th, 2025: Over the past few days, the depreciation of the Indian rupee has come to a halt, and it has strengthened against the US dollar. This brings relief to those concerned about the rupee’s decline and pauses discussions on the topic. However, it is important to remember that the depreciation of the rupee has a long history.
In 1947, the exchange rate of the rupee was ₹3.30 per US dollar, which dropped to ₹7.8 in 1980 and further declined to ₹17.01 by 1990. After economic liberalization, the rate fell to ₹43.50 in 2000. A decade later, in 2010, it stood at ₹46, and by 2020, it had depreciated to ₹71. Since September 2021, the exchange rate has risen from ₹73 to over ₹87 in recent times.
The depreciation of the rupee has often been turned into a political issue, with opposition parties blaming the government for the fall. However, despite the rupee’s decline over the decades, India’s economy has witnessed significant growth.
It is essential to understand that a falling rupee does not necessarily indicate economic weakness or affect national pride. A country’s economic system is far more complex.
When a nation engages in global trade, its currency exchange rate significantly impacts business activities. A depreciated rupee benefits Indian manufacturers by making their products more affordable in international markets since they sell in dollars while incurring costs in rupees.
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This advantage extends to the IT services sector, which caters to international clients. Increased exports lead to better employment opportunities.
Additionally, a weaker rupee makes India a more attractive destination for tourists and increases the value of remittances sent by Indians working abroad. However, rupee depreciation negatively affects imports by making them more expensive.
India heavily relies on petroleum imports, and since demand remains stable regardless of price, this increases overall costs. Similarly, India imports gold, which is already expensive. Furthermore, studying or traveling abroad becomes costlier.
The U.S. government’s new tariff policies under Trump put pressure on international trade, affecting exports from India and other nations. The increased cost of Indian exports in the U.S. market may reduce competitiveness.
In such situations, rupee depreciation provides essential support to sustain competition in the global market.
A weaker rupee also supports India’s “Make in India” initiative. Until now, many consumer goods, such as mobile phones, were largely assembled in India using imported components from China.
With a stronger dollar, importing such components becomes more expensive, encouraging companies to manufacture all parts domestically. This, in turn, boosts research, development, and employment opportunities within the country.
However, currency devaluation is not always beneficial. Historical examples from other countries show mixed outcomes. In the early 2000s, China deliberately devalued its currency, the Yuan, by nearly 30% compared to the US dollar.
This strategy made Chinese products cheaper for foreign buyers, significantly boosting exports. As a result, China’s exports surged, helping it become the world’s largest exporter.
On the other hand, Argentina faced an economic crisis due to currency depreciation. Between 1991 and 2000, Argentina pegged its currency, the peso, to the US dollar at a 1:1 ratio. However, during the 2001–2002 financial crisis, investors lost confidence in the peso, causing its value to plummet by nearly 70-75% in a few months.
This sharp devaluation led to skyrocketing inflation, exceeding 40% annually, and devastated the country’s economy.
It is crucial to stop politicizing the rupee’s exchange rate against the US dollar. The rupee’s natural movement should be allowed in economic markets, and concerns should only arise if the depreciation happens suddenly and drastically.
Instead of fixating on the rupee’s fluctuations, more focus should be given to other key economic aspects.