Question

The purpose of devaluation of Indian rupee is to _______.

• A. reduce imports and to increase exports
• B. increase imports and to reduce exports
• C. reduce differences between value of goods and value of services imported
• D. maintain favourable balance of payments

Answer 1

Answer: (D)

maintain favourable balance of payments

Devaluation is a deliberate lowering of the value of a country's currency with respect to another currency or a group of currencies.

Currency devaluation can be used by countries to achieve economic policy. Having a weaker currency relative to the rest of the world can help boost exports, shrink trade deficits and reduce the cost of interest payments on its outstanding government debts.

Altogether, it can help to improve the balance of payments of the country.