Movement of Rupee since 1991
During the latter half of 1970 there was a current account surplus. That was a period of import exchange strategy and India was following a model of closed economy. During the 1980 the current account deficit began to increase resulting into a Balance Of Payment (BOP) crisis in 1991. During the 1991 Union Budget the Indian Rupee was devalued and the Indian government opened up its economy. Due to this several reform were liberalized and the economy’s exchange rate shifted from a fixed to a floating one. Hence, there was a need to analyze the current account and also the rupee movement from 1991 onwards. India always faced a current account deficit except the initial years in 2000. The deficit had been funded through capital flows and mostly capital flows were higher than the current account deficit resulting in balance of payment surplus. The surplus led to a rise in the forex reserves from 5.8 billion Dollars in 90-91 to 304.8 billion Dollars by 2010-11 (Exhibit 2). In 90-91, gold contributed to around 60% of forex reserves and forex assets were around 38%. This percentage has transformed to 1.5% and 90% respectively by 2011-12.
Figure 1: Balance Of Payments
Figure 2: Forex Reserve
In the table below we can see that during 1990 - 2000 there was a surplus in the Balance of Payment by about 4.1 billion dollars and it increased to around 20 billion dollars in the year 2000. During the period in 2000-05 and 2005-11 we can see a steep decline and a sudden rise respectively in both the capital account surplus and current account deficit. Post 2004 the Balance of Payment had been declining and became a matter of concern. There has been a rise in the Forex Reserves mainly during 2005 - 11.
Table 1: Balance of Payment
While looking at the Rupee movement in the figure below one can clearly interpret and see that the rupee has been depreciating since 1991. Figure 3 is depicting the Rupee movement against the other major currencies. The best way to understand the movement of Rupee is to track the real effective exchange rate. Real effective exchange rate (REER) is formed on basket of currencies against which a country trades and is adjusted for inflation. A rise in index signifies appreciation of the currency against the basket and a decline signifies depreciation.
While reading “A Rupee Earned”, by If Bulatkin, the narrator makes it evident that not everything in life comes effortlessly, and that sometimes you need to put in the work to gain the results you want. Too often in life we attempt to find shortcuts to resolve our problems, but it doesn’t always work out because we cannot cheat our way through life.
Canada’s overall balance of goods and services also rose every year except for 1997, 1998, and 2002. They initially were running an overall deficit in 1992 and 1993 from a larger deficit in services than surplus in goods. The most common trend that is evident is that every trade category dropped in 2001 and/or 2002. There were no real substantial drops and the declines were quickly met with increases in the following years. It is likely that Canada’s economy felt at least some of the effects of the terrorist attacks on September 11, 2001 because they are such a large trading partner of the United States.
Mexico was running an increasing current account deficit from US$7.5 billion in 1990 to US$23.4 billion in 1993. This indicates an excess of private investing over private savings. However, the country was able to maintain an improving fiscal account from US$3.6 billion deficit in 1990 to US$0.7 billion surplus in 1993. The deficit in current account was financed through capital funds from abroad resulting the capital account to increase from US$8.4 billion in 1990 to US$33.8 billion in 1993.
The real exchange rate tells us the rate at which we can trade the goods of one country for goods from other countries. The real exchange rate some- times referred to as the terms of trade. To view the exchange rate relationship in real terms using the nominal exchange rate, can be taken samples h a goods produced in some countries, such as cars. Suppose the price of the car with 25,000 dollars, while the price of Japanese cars is 4,000,000 yen . To compare the prices of both cars , we have to transform them into a common currency. If one dollar worth of 80 yen , the price of cars Americans to 80 x 25,000, or 2,000,000 yen. By comparing the price of an American car (2,000,000 yen) and the price of Japanese cars (4,000,000 yen), it can be concluded that the price of the American car is half the price of Japanese cars . In other words, pad a price effect we can swap two American cars to get a Japanese car . Peng count can be written as
Economic indicators often affect and influence the value of a country's currency. The Trade Deficit, the Gross National Product (GNP), Industrial Production, the Unemployment Rate, and Business Inventories are examples of economic indicators. We will be dealing with four specific indicators: interest rate, inflation, unemployment, and employment growth, as well as Real Gross Domestic Product (GDP). Real GDP is so called because the effects of inflation and depreciation are accounted for in the figures. The state of the economy is important both on a micro and macroeconomic level.
This investigation seeks to discover whether or not the Sepoy revolution in 1857 had a sufficient impact on India’s rise to independence and separation from the British Empire. The Sepoy revolution was a revolution of the Sepoy soldiers in 1857, and complete independence from the British Empire was not achieved by Indians until 1947. Therefore, did the Sepoy revolution catalyze their rise to independence, or was independence inevitable? The impact of the Sepoy Revolution will be found by looking at the effects of the Sepoy revolution and determining whether or not they were key factors in the rise to independence. A variety of sources will be used. Two important sources that will be used during this investigation are Indian Summer by Alex Von Tunzelmann and Empire: How Britain Made The Modern World by Niall Ferguson.
There are three different general trends (directions to prices or rates) in the economy. " Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price Index, industrial production, bankruptcies, GDP, stock market prices, money supply changes, and housing starts also called business indicators." http://www.investorwords.com/1643/economic_indicator.html.
1) Japan still has the largest foreign currency reserves in the world even after years
The health of the Singapore economy based on the analysis of its positive balance of payment is very favourable because it is shown in part (a) that Singapore economy is growing at a high rate and is assured of economic growth. Singapore has very few debts and these debts will not hinder further plans as the income generated will be more focused on research and development sector rather than repayment of debts. Additional, Singapore’s Gross Domestic Product (GDP) is high and this means that the production activities are also high and the people within
In order to assess the current state of the economy, the examination of important economic indicators or variables has always played a vital role in the understanding of the complex economic systems we live in. The analysis of these economic variables studied by many, not only has served as a tool to evaluate the current economic performance of a country, but also has allowed experts to envisage and continue the pavement of an economy's road. Currently, some economic variables have had favorable improvements indicating a general good outlook for the economy for the following months, requiring a further individual analysis and comparisons in order to foresee crisis or successes.
Fixed exchange rate which is at times known as pegged exchange rate is an exchange rate regime where a country’s currency value is fixed against the value of another currency or to another measure of value such as gold.
The stability of currency values plays a significant role for economic and financial stability. It is not difficult to see the exchange rate fluctuations are widely regarded as damaging. As the movements of the exchange rate have significant and large effects on the trade balance, resource allocation, domestic prices, interest rate, national income and other key economic variables. Then can exchange rate movements be predicted by these fundamental economic variables?
In 1996, the US current account and emerging market plus developing country current account were each about zero. In 2008, US current account was in deficit by $ 600 bn, the emerging market/developing country current account in surplus by $ 900 bn. (sect. 1.1)
As an aftereffect of inflation, the purchasing power of a unit of money falls. For instance, a pack of gum that costs $1 and if inflation rate is 2% then in a given year will cost $1.02 the following year. As products and services require more cash to buy, the implicit value of that currency falls.
Daily in the USA about 38 million banknotes of various face value for total amount about 541 million dollars are issued (Facts about USA money).Dollars involve deep consequences both for the USA, and for other countries. Increase of its course relatively reduces the volume of export revenue in dollars, quite often involves more considerable, than change of an exchange rate, falling of the world prices, especially on raw materials. On the contrary, decrease in a dollar rate serves as the powerful tool promoting growth of the American export and a pushing off of competitors of the USA in foreign markets. At the same time import to the USA owing to effect of a rise in prices restrains. Thus, for the USA changes in the exchange rate of dollar anyway bring benefits and advantages.Reduction of leading positions of the USA in world economy is assisted by the international role of dollar which remains the main reserve and settlement means in world monetary system. Foreign currency reserves of the central banks of other countries for 61% consist of dollars, nearly 2/3 calculations in world trade are carried out in dollars; the dollar serves as a measure of value of many important goods (for example: oil) in the world market; in dollars 3/4 international bank crediting is made (Aleksandr Popov). Changes in the exchange rate of dollar involve deep consequences both for the USA, and for other countries. Increase of its course relatively reduces the volume of export revenue in dollars, quite often involves more considerable, than change of an exchange rate, falling of the world prices, especially on raw materials. On the contrary, decrease in a dollar rate serves as the powerful tool promoting growth of the American export and a pushing off...