Indian Rupee Crisis of 2013 Case Study Solution
The decision of the US Federal Reserve System to taper its Quantitative Easing Program (QE), has triggered the large outflow of capital from India as well as depreciation in the Indian currency by 13.7 percent, from June to August, in the year 2013. Such capital outflows were coupled with an increasing demand for USD by the Indian importers, including: oil firms, banks as well as corporate companies, which have increased pressure on USD, thus resulting in the depreciation of Indian currency. A number of complaints related to an increasing cost, were received by the firms dependent on imports, but the exporters had numerous benefits from the depreciation in the Indian currency.
On the macro level; the growth of the economy dropped and inflation within the country remained high, thus raising concerns that the much-touted “Indian growth story” was dead. The current crises was reminiscent of the balance of payment which the country had faced in early 1990s. The central bank of India: the Reserve Bank of India is faced with the challenging task of stopping the decline in rupee and fighting against the inflation, once the growth of economy had slowed down. There were high expectations of the action from the bank, even as policy maneuverability room appeared limited…………………………..
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