Download Rupee Devaluation

Rupee Devaluation
Presented By:Navin Kumar
TE(PS-9),
TOPICS AT GLANCE
Rupee Devaluation: Currency
 Valuation of Currency
 History of Rupee
 Devaluation of Rupee
 Oil
 OIL Role
CURRENCY
“Currency is anything that is used as a medium of
exchange. In the most specific use of the word, it refers
to money ”.
Types of Money :
- Commodity money
- Representative money
- Fiat money ,and
- Commercial bank money
Commodity Money
“Anything that has a value of its own and is used as a
medium of exchange”.
.
Representative Money
“Representative money is token coins and notes that can
be exchanged for a fixed amount of precious metals or
other commodities”.
.
Fiat Money
“Fiat money's value is imposed by the government,
which makes refusal of payments made in the notified
legal tender, in the form of currency notes and coins,
illegal.”
COMMERCIAL BANK MONEY
“Instruments such as cheques, demand drafts and
banker's drafts are commercial bank money.
They can be used to make payments for goods
and services”
VALUATION OF CURRENCY
Spot Rate
Buying and Selling Rate
Forward Rate
Floating Exchange Rate
Fixed Exchange Rate
.
SPOT RATE
"The spot rate is the value of the currency at the
moment of the quote. This value is in turn based on
how much buyers are willing to pay and how much
sellers are willing to accept, which depends on factors
such as current market value and expected future
market value.
Buying and Selling Rate
"The BUYING AND SELLING RATES are from the
point of view of the Exchange Bank.
BUYING RATE is the rate at which the EXCHANGE
BANK will BUY the Currency.
SELLING RATE is the rate at which the
EXCHANGE BANK will SELL the Currency.
Exchange Bank's SELLING RATE will always be
higher than its BUYING RATE.
The difference between the SELLING RATE AND
BUYING RATE is the Exchange Bank's profit"
Forward Rate
"Forward rate refers to rate of currency that is quoted
and traded today but for delivery and payment on a set
future date".
The forward exchange rate is the rate at which a
commercial bank is willing to commit to exchange one
currency for another at some specified future date.
FLOATING RATE
"A floating rate is the rate in which a currency's value is
allowed to fluctuate according to the foreign-exchange
market,i.e rate of a currency will be purely based on
demand of that particular currency. A currency that
uses a floating exchange rate is known as a floating
currency."
• In cases of extreme appreciation or depreciation, a
central bank will normally intervene to stabilize the
currency.
FIXED RATE
"A fixed exchange rate, sometimes called a pegged
exchange rate, where a currency's value is fixed
against the value of another single currency, to a
basket of other currencies, or to another measure of
value, such as gold."
• A fixed exchange rate makes trade and investments
between the two countries easier and more predictable.
• Controlled by govt. Govt may devaluate it to meet its need.
Valuation of Currency
• The most important criteria determining the value
of currency is its demand.
• If the demand for Rupee increases, the value of
Rupee will appreciate and vice-versa.
Valuation of Currency
“ The value of a currency depends on
factors that affect the economy ”
Import & Export
Interest Rate
Growth Rate
Central Bank Intervention
Growth Rate
•
There should be a balance between Growth and increase in money
flow in the economy(by printing of money or by borrow money
from institutions such as the World Bank and the IMF )
• Let us say the central bank of a country increases money flow in the
economy by 4 per cent while economic growth is 3 per cent. The
difference causes inflation,ie decrease in purchasing power.
Eg: Supply of excess water to limited field, devalues the water and
leads to unnecessary demand
Interest rate
• To meet expenses, the Government at times opts to borrow money
from institutions such as the World Bank and the IMF,leading to
debth.
• If burrowed money is not properly invested for increasing
production(bring revenue to reduce deficit), it will inturn lead to
increase in consumption/spending.Thus again leading to inflation.
• To reduce spending/encourage saving ,Central bank will increase
interest rate.
• Bank will need more money to pay us back, so growth is
needed.Otherwise more debth/inflation cycle.
• High interest rate is also to attract foreign investor/NRI to put money
in the country. Govt can use this money for its growth.
Import & Export
“A country that sells more goods and services in overseas markets than
it buys from them, has a trade surplus. This means more foreign
currency comes into the country than what is paid for imports. This
strengthens the local currency”
• Government tries to incentivise exports and reduce imports.
• Importing foreign goods requires us to make payment in dollars thus
strengthening the dollar’s demand.
• Exports do the exact reverse.
Central Bank Intervention
• When there is appreciation, central Bank buy foreign
reserves.
• When there is deppreciation, central Bank buy its own
currency.
Rupee
1947 : 1$ (Fixed Rate)
1948-1966: 4.79$ (lending from IMF)
1966: 7.57$ (Devaluated to attract trade )
1971: Interrms of dollar
1975: 8.39$ (Linked to basket of three countries)
1985: 12$
1991: 17.90$ (Liberlisation)
1993: 31.37$ (Vaue based on market sentiment, Floating Rate)
2000-2010: 40$-50$
2013: 62 $
Devaluation of Rupee
Recesson in US
FIIs withdrawn(Increase in demand of Dollar)
Low economic Growth
Inflation (Hurting industries,costly import)
Investors have lesser faith on Rupee,Withdraw of investment.
Dependency on foreign investmet
Corruption.
Low export (Less Demand, decrease in demand of Rupee)
Ever Increasing Import(Increase in demand of Dollar)
High fiscal deficit
India's Import & India's Export
India's Import : C:\Documents and
Settings\ioc2\Desktop\Rupee
Devaluatio\IcomExcel.asp(1).xls
India's Export:C:\Documents and
Settings\ioc2\Desktop\Rupee
Devaluatio\ecomExcel.asp.xls
Oil Export & Import
Oil Import :
`78,560,171.48 (in Lacs), 29.4325%
Oil Export : `0.00, 0%
Soloution: Increase Export & Decrease Import
OIL Role
Moral responsibility to promote Indian products.(Buying
Indian product will cut down import ,reduce fiscal deficit).
- Good quality Indian products must replace foreign products in
OIL canteen. Incentive on buying Indian vehicle.
-Reduce purchase of foreign goods at individual and company
level.
C:\Documents and Settings\ioc2\Desktop\Rupee Devaluatio\SwadeshiVsvideshiproductslist.docx
.
OIL Role
Bring a culture to save oil.
- There should be an account on oil saved during a FY-year.
- Identify and Cut down the consumption of oil in areas where
company's performance would not be affected.
- Practice the pledge we take.
- Take power shutdown during Energy/ Oil/ Environment
conservation day week for half an hour or an hour. And carry
out scheduled maintenance, house keeping or other preventive
maintenance.
- Optimum movement of vehicle during
Energy/Oil/Environment conservation day week.
OIL Role
Set up a working model to save oil, and project it at
national level.
- Introduce Bus service for office,in Duliajan.
- Well organised wrt department, residence& time.
- Scheduled bus timing for those who may work late.
- Foothpath with Roof Sheds to be built inside the
industrial area connecting all department. Bus will
stop at the stand attached to the foothpath.
,
.
OIL Role
Set up a working model to save oil, and project it at national
level.
- Only fixed no of times in a month ,one can use his/her
vehicle. Issue Oil Green card ,that will be consumed each time
one uses the car.
- A person holding max no. of card must be appericiated.
- Make a contract for call-in bicycle rackshaw service, for
household shopping in Duliajan township. Rackshaw should
be of desired standard.
,
.
OIL Role
Identify local small scale
industry, and assist them.
,
.
OIL Role
Rupees is falling, we need to rise.
Let’s be the officer of the country, not just of the
company.
.
Thank you
.