Is devaluation the same as depreciation?

No, the devaluation of currency is not the same as depreciation. Reduction of the value of currency in floating exchange rate is known as depreciation and reducing the value of currency in fixed exchange rate is known as depreciation. Depreciation of currency is a conscious decision taken by the Government and economic policy makers of the country. You can read about the Balance of Payment Crisis, 1991 – Causes and Measures to Control it in the given link.

Depreciation usually happens when there is high inflation, high current account deficit, risk aversion by investors, political instability, etc.

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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