How is devaluation done?

When devaluation of currency is done, the monetary authority formally sets a lower exchange rate of the national currency. Devaluation is deliberately bringing down the value of a country’s currency when compared to currencies of other countries, or a currency standard. You can read about the Balance of Payment Crisis, 1991 – Causes and Measures to Control it in the given link.

When the value of currency is brought down, exports receive a boost and imports get discouraged, thereby helping to reduce the trade deficit. 

Further readings:

  1. Forex Reserves – Meaning, Importance, Advantages (Notes for UPSC IAS exam)
  2. New Economic Policy of 1991 – Objectives, Liberalisation, Privatisation, Globalisation

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