Hello Everyone today I would like to share my views on what would happen if the value of Rupee equals the Value of Dollars.

This blog is being written seeing the rupee devalue against dollars as the rupee is going through it’s worst faze.

Before starting this article I would like to say that a countries Economic superiority is not shown by the value of its currency as if that were the case Bangladesh would have been considered superior to Japan as 1 BDT= 1.40 YEN

Imports would be cheaper: This is because Indians buying goods from the international market will have to shell out Rupee 1 instead of Rupee 70 shelled out by them today.

Luxuries would be cheaper: As the value of the rupee and dollar would equate buying luxury item’s like iPhones would be a lot cheaper as 1 iPhone would cost INR700 only

Prices of petrol would be cheaper: The same reason as given above as imports would be cheaper prices of petrol would be cheaper.

Exports will be expensive: As Indian products will be expensive compared to other competing nations. Indian exports have been booming well in recent years. If it is expensive, no one would like to buy from India when other competitors offer the same at a cheaper price.

There would be no foreign Investment: The primary reason for a foreign investment in India is the cheap labour cost. Foreign companies will not invest in India as the cost of labour would be higher compared to other countries. This would also lead to problems like unemployment ending in poverty and so the value of rupee would depreciate automatically.

1. In the diagram, AD represents Aggregate Demand, SAS Aggregate Supply, Y shows the shift in the GDP and P the fall in price. 2. The price of USD-INR has fallen in the diagram that will lead to buying fewer goods & services than previously and as supply will not change in the short term, the short run Aggregate Supply (SAS) will meet the shifted Demand curve lower than previously. And hence, GDP will fall.

This is the reason why RBI is very careful not to let rupee too strong. It helps keep exports high, wages high and imports low.

1. You could have said 1 rupee equals 10,000 dollars as the starting point and designed the economy that way. It would not have mattered at all. 

2. The starting points are merely for convenience. Reserve Bank of India keeps an eye on the exchange rates very closely and regulates it by altering the interest rates of the commercial and nationalized banks. 

3. What matters is, whether the currency is moving up or down over a long time. The rupee has gone down against the Dollar over the last years and that is an indication that India’s productivity has not kept up and the inflation was high relative to the US. 

4. The Indian Rupee should become stronger but not by any direct changes. The nation should increase the productivity and provide more value to the currency.