Question

Indian currency falls more than 100 paisa in a day to Rupees 71 from 70 against the US dollar
Discuss the impact of this situation on Indian exports imports and on BOP

Answer 1

Dear Student,

​​​​​​In this case there is depreciation of currency.
$1= Rs.71
$1= Rs.70
It is appreciation of $ and depreciation of Rs. So depreciation of currency make domestic goods cheaper to foreigners in international market . It is increase in exchange of the country which leads to increase in inflow of foreign exchange. This reduces deficit , depreciation of currency makes market expensive . so imports falls