In last 10 years, the exchange rate between INR/USD has gone up by 59.91%. But in a country like India where majority are poor, this benefit is felt less in short term. Pros of strong INR is improved purchasing power. This leads to current account deficit, low employment rate, and slower GDP growth. For a developing country like India, stronger INR means less exports. Strong INR: Stronger INR also has its own pros and cons.Good, it improves the current account deficit, generates more employment stimulating faster GDP growth. Bad, it decreases purchasing power of a nation. Weak INR: When INR weakens compared to USD, it has two impacts (One good and other bad).When demand for a currency grows, currency (INR) becomes stronger and vice versa.

RBI (Central Bank of India) takes steps which stimulates the currency’s demand or supply.

Indian Economy: Two constituents of Indian economy is shown (a) RBI and (b) Domestic Companies.

But before we go into those details, allow me to explain briefly what is depicted in the above flow chart:

We will try to answer these two questions in this article. What makes the exchange rate fluctuate? What is the impact of currency fluctuation? But what goes behind the scene is more interesting. The value of INR compared to USD change every day.

We all know that exchange rates fluctuate.

All country money in indian rupees