Calculative use of money

While the weakening rupee is disheartening Indian merchants, and also students who are looking to fly abroad, Indian exporters are celebrating the same. Exporters of textile, engineering goods, petroleum products, jewellery and chemicals – the top five Indian exports – are set to make the most from the sharp decline in the Indian rupee, among other exporters. This is because Indian exporters receive their income in foreign currency. The foreign currency when exchanged for the Indian rupee will fetch them more profits, if the rupee weakens. This is because when our domestic currency weakens against a foreign currency, the exchange rate goes higher. So, if you sell when the exchange rate is 79, and receive the payment when the exchange rate is 80, you are making one rupee extra per dollar, without doing anything. This is called foreign exchange gain, in accounting terms. Meanwhile, a weakening rupee worsens the inflationary conditions in India, as the country is a net importer – importing more than what we export.