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Victory on The Indian Rupee: Donald Trump’s unexpected victory in the 2016 US Presidential elections not only created a stir in US politics but also left a deep impact on the global economic markets. The Indian Rupee (INR) fell to a record low against the US Dollar (USD) after Trump won. This event was going to have a huge impact on the Indian economy, currency markets and the global financial system. In this article, we will understand how Trump’s victory affected the Indian Rupee and analyze its causes and consequences.
Trump’s Victory and Impact on Global Markets
The result of the US Presidential elections gave a big shock to the global markets. Trump’s business-friendly and protectionist approach, such as heavy duties on imports and stringent regulations on foreign investors, created an atmosphere of uncertainty among global investors. This uncertainty was particularly impactful on emerging economies, such as India, where a large part of foreign investment comes through US dollars.
Victory on The Indian Rupee: The strength of the US dollar and the global risk-on environment were the main reasons for the fall of the Indian rupee. Trump’s policies led to increased investor confidence in the US dollar, which reduced the demand for the rupee and weakened it against the dollar.
Victory on The Indian Rupee: Dollar and Rupee Difference
The difference between the rupee and the dollar is always important, as India is an import-oriented country and most of its international transactions are in dollars. When the dollar strengthens, imported goods become expensive for India, such as crude oil, machinery, and other essential goods. This results in an increase in India’s trade deficit, and also affects the inflation rate. The strength of the dollar after Trump’s election victory put pressure on the Indian rupee, causing the rupee to depreciate.
Victory on The Indian Rupee: Foreign investors’ attitude
Trump’s policies, such as higher tax rates in the US and stricter regulations for foreign investors, created confusion and concern among foreign investors. However, investors in India still continued to invest in the Indian market, but the rise in the US dollar led to investors’ focus shifting towards safer dollar investments. This weakened the Indian rupee even further.
RBI’s response
Despite the rupee’s fall, the Reserve Bank of India (RBI) intervened in the currency market to control the rupee’s fall. The RBI used foreign exchange reserves and increased the supply of dollars, which helped to arrest the rupee’s fall to some extent. However, this intervention was temporary and not seen as a long-term solution.
Impact on Indian economy
The fall of the Indian rupee had a direct impact on the Indian economy. Imported goods became expensive, which increased inflation and affected the purchasing power of Indian consumers. Moreover, the rise in crude oil prices also increased the Indian oil import bill, which was already the main reason for India’s trade deficit.
Moreover, the rupee’s weakness also provided some benefits for Indian companies, especially those that export. Their goods now became cheaper in foreign markets, increasing the competitiveness of their products. However, despite this positive impact, the overall Indian economy faced instability.
Inflation and Consumer
As the value of the Indian rupee fell, the inflation rate in India also increased. Consumers had to bear the brunt of expensive goods due to the increase in the prices of imported goods. The increase in crude oil prices also led to a hike in the prices of petrol and diesel, which increased transportation costs and also increased the cost of living.
The most affected classes by the fall of the rupee were the poor and the middle class, whose income was stable, but their livelihood became difficult due to inflation. Thus, the fall of the rupee also had a negative impact on the consumer market.
Trump’s Economic Policies and Future
The impact of Trump’s economic policies on the Indian rupee was likely to continue for a long time. His protectionist approach and trade wars affected international trade relations. The rise in the strength of the US dollar and disagreements with other countries could have been challenging for emerging countries like India. Although the Indian government and RBI took several measures to keep the Indian economy stable, uncertainty in global markets made long-term solutions difficult.
Victory on The Indian Rupee: The Indian rupee fell to a record low after Donald Trump’s victory, which was a result of volatility in global markets, the strength of the US dollar, and the attitude of foreign investors. The weakness of the rupee affected the Indian economy, but at the same time export companies also got some benefits. The Reserve Bank of India intervened to control the situation, but the rupee remained weak despite this. In the future, Trump’s policies may have a long-term impact on the Indian rupee, and India will need strong economic policies to deal with this crisis.
