Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4. Examine the various factors behind the depreciation of Indian rupee. What is its impact on the Indian economy? What measures are required to counter the depreciation? (250 words)
Difficulty level: Moderate
Reference: Live Mint , Indian Express
Why the question:
The Indian rupee has depreciated less than 7%, as compared to the strongest level in 2021, which was 72.29% on 17 March.
Key Demand of the question:
To write about the causes for depreciation of rupee, its impact and measures needed to counter it.
Directive word:
Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.
Structure of the answer:
Introduction:
Begin by explaining the concept of depreciation of rupee.
Body:
First, write about the causes behind the recent depreciation – rising interest rates in USA, flight of capital has taken place from developing countries like India, portfolio investors tend to withdraw from these markets, Increasing crude oil prices and Ukraine crisis etc.
Next, discuss the impact of falling rupee value on inflation, cad, price of essential imports etc.
Next, write about the various steps that are required to counter it.
Conclusion:
Conclude with a way forward.
