A REPORT ON STUDY OF FACTORS AFFECTING INDIAN RUPEE AND ITS IMPACT ON ECONOMY Submitted to

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT) CHANGA

Prepared by SAPAN P. PANDYA ID No: 11PGDM005 PGDM Quarter 6

Under the Guidance of Ms.Kirti Machwana

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)
AT & PO. CHANGA 388 421 TA: PETLAD DIST. ANAND, GUJARAT

September 2012

Certificate:
This is to certify that this report on STUDY ON FACTORS AFFECTING INDIAN RUPEE DEPRICATED ON INDIAN ECONOMY is the bona fide work of Mr. SAPAN PANDYA, student of Second Year of PGDM Programme (2011-2013) submitted to CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY, CHANGA in partial fulfillment of their academic requirement of the PGDM PROGRAMME.

__________________
Ms. Kirti Machwana Project Guide

__________________
Prof. Dr. Govind Dave Dean, Principal

DECLARATION
I SAPAN PANDYA student of the two-year PGDM programme at Indukaka Ipcowala Institute of Management (I2IM) hereby declare that the report on COMPREHENSIVE PROJECT entitled STUDY ON FACTORS AFFECTING INDIAN RUPEE DEPRICATED ON INDIAN ECONOMY is the result of my own work. I also acknowledge the other works / publications cited in the report.

(Signature) Place: Changa Date: --.2012 (Name of the student)

ACKNOWLEDGEMENT
I would Like to Acknowledge the support and Contribution Provided by Project Guide Ms.Kirti Machwana for her constant support and Guidance. I would Like to thank the Institute and specially our Dean, Principal Dr. Govind Dave for Giving me the Opportunity to Take up the Training and Project work.

TABLE OF CONTENTS:

CHAPTER: 1 INTRODUCTION ................................................................................................................ 6 1.1 Introduction of the Forex Market :........................................................................................................ 7 How is the Forex market different from the stock market? ................................................... 7 The Benefits of Forex Trading .................................................................................................. 8

1.2 Currencies in the world : ..................................................................................................................... 10 1.3 Introduction of the exchange rates ...................................................................................................... 16 1.4 Currency trade on Indian stock market: .............................................................................................. 17 The history of the US Dollar ..................................................................................................................... 17 1.5 Bretton Woods system ........................................................................................................................ 21 1.6 Structure of Currency trading ............................................................................................................. 22 Forex Market Structure ............................................................................................................................. 22 1. Brokers .............................................................................................................................................. 22 2. Institutional Traders .......................................................................................................................... 22 3. Individual Traders ............................................................................................................................. 23 CHAPTER: 2 ............................................................................................................................................... 24 LITERATURE REVIEW .......................................................................................................................... 24 2.1 Factors affecting Indian rupee ............................................................................................................ 25 2.2Causes of depreciation in Indian rupee ................................................................................................ 28 2.3 Impact of Indian rupee depreciation ................................................................................................... 30 CHAPTER:3 ................................................................................................................................................ 34 RESEARCH METHDOLOGY ................................................................................................................. 34 CHAPTER: 4 ............................................................................................................................................... 36 DATA ANALYSIS ...................................................................................................................................... 36 4.1 Inflation Rate vs. Exchange Rate ........................................................................................................ 37 4.4 Foreign Institutional investors VS. Exchange Rate ............................................................................ 45 CHAPTER: 5 FINDINGS & CONCLUSION .......................................................................................... 54 Annexure...................................................................................................................................................... 57 Bibliography ................................................................................................................................................ 59

CHAPTER: 1 INTRODUCTION

1.1 Introduction of the Forex Market :

The Foreign Exchange market, also referred to as the "Forex" or "FX" market is the largest financial market in the world, with a daily average turnover of US$1.9 trillion. "Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY). There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.

For speculators, we believe the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. A true 24-hour market from Sunday 5:00 PM ET to Friday 5:00PM ET, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

The FX market is considered an Over The Counter (OTC) or 'interbank/interdealer' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.

How is the Forex market different from the stock market?

As a result of its global dimension, the Forex market is open 24 hours a day, which enables investors to correct their positions at any point in time. Given the large number of players, the Forex market has narrow spreads and virtually no price gaps. The lack of price gaps enables investors to count on non-slippage order execution. However, in a very volatile market the possibility for slippage exists.

The large volume of participants also reduces opportunity for insider information. To put it simply, there has NEVER been a case of complete currency collapse in a developed country. The volatility of leading currencies rarely exceeds 1% per day, in contrast to the volatility of stocks, which may fluctuate by up to 10% over one trading session. The Forex market generally provides more opportunities for Leveraged trading

 The Benefits of Forex Trading

1. No short selling restrictions

2. Trade on your schedule , respond to changes in the market

Benefits of Forex Trading

3. Low transactions costs

6. Easily trade long or short 4. Low account minimums

5. Always Moving

1. No short selling restrictions:

Forex trading always involves buying one currency and selling another, so traders can easily trade in a rising or falling market. There is no Zero Uptick rule or any other restriction against shorting a currency.

2. Trade on your schedule, respond to changes in the market

Forex is a true 24-hour market, open continuously from 5:00pm ET on Sunday to 5:00 pm on Friday. With three distinct trading sessions in the US, Europe and Asia, you can trade on your own schedule and respond to breaking news. A trader can put on or take off positions literally any time of day

or night, regardless of their base of operations. That opens the game up to a great many individuals who might not otherwise have the time available to trade.

3. Low transactions costs

For most traders, the forex market also offers the benefit of no transaction costs. For the most part, forex brokers do not charge commissions (if they do, they are relatively small). There is, of course, the bid/offer spread, which can be viewed as a transaction cost, but the reality of the situation is that most traders buy at the offer and sell at the bid in whatever other market they trade, so that's really no different. Actually, the forex spreads can be quite small in the major currency pairs.

4. Low account minimums:

Forex trading is also open to a wider trading demographic in that there are many Opportunities to open smaller accounts than is the case in other markets. In fact, there is at least one broker which has no minimum account size. What's more, they also have no minimum trade size. That sort of flexibility opens the door to essentially anyone who wants to explore forex trading. This isn't to say that all brokers are that flexible. There are, however, a great many which offer so-called mini-contracts.

5. Always Moving
One of the biggest attractions to forex trading is that there's just about always something moving. There are a number of primary currencies involved, each of which is continuously interacting with all the others. Chances are, at any given time, there is movement in at least one of those exchange rates based simply on the sheer volume of trading and the number of global news events providing impetus to action.

6. Easily trade long or short

In the stock market there are restrictions imposed on selling short. In forex there is nothing of the sort. It is just as easy to taking a short position as it is to take a long one.

1.2 Currencies in the world :

Country Afghanistan Algeria Andorra Argentina Australia Austria Bahamas Bahrain Barbados Belgium Belize Benin Bolivia Brazil Brunei Bulgaria Cameroon Canada Cayman Islands Central African Rep. Chad Chile China Columbia Currency Afghani Dinar Euro Austral Dollar Euro Dollar Dinar Dollar Euro Dollar Franc Boliviano Real Dollar Lev Franc Dollar Dollar Franc Franc Peso Yuan Peso Sub Currency 100 puls 100 centimes 100 cents 100 centavos 100 cents 100 cents 100 cents 1,000 fils 100 cents 100 cents 100 cents 100 centimes 100 centavos 100 centavos 100 cents or sen 100 stotinki 100 centimes 100 cents 100 cents 100 centimes 100 centimes 100 centavos 10 fen 100 centavos

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Congo Costa Rica Cuba Cyprus (Greek) Cyprus (Turkish) Czechoslovakia Denmark Djibouti Dominican Rep. Ecuador Egypt El Salvador Ethiopia Fiji Finland France Gabon Gambia Germany Ghana Greece Guatemala Guinea Guyana Haiti Honduras

Franc Colon Peso Euro Lira Koruna Krone Franc Peso Dollar Pound Colon Birr Dollar Euro Euro Franc Dalasi Euro Cedi Euro Quetzal Franc Dollar Gourde Lempira 11

100 centimes 100 centimos 100 centavos 100 cents 100 kurus 100 halers 100 ore 100 centimes 100 centavos 100 cents 100 piastres 100 centavos 100 cents 100 cents 100 cents 100 cents 100 centimes 100 bututs 100 cents 100 pesewas 100 cents 100 centavos 100 centimes 100 cents 100 centimes 100 centavos

Hong Kong Hungary Iceland India Indonesia Iraq Ireland Israel Italy Ivory Coast Jamaica Japan Jordan Kenya Kuwait Lebanon Luxembourg Malawi Malaysia Maldives Malta Mauritania Mauritius Mexico Mongolia Montenegro

Dollar Forint Krona Rupee Rupiah Dinar Euro Shekel Euro Franc Dollar Yen Dinar Shilling Dinar Pound Euro Kwacha Ringgit Rufiyaa Euro Ouguiya Rupee Peso Tugrik Euro 12

100 cents 100 filler 100 aurar 100 paise 100 sen 1,000 fils 100 cents 100 agorot 100 cents 100 centimes 100 cents 100 cen 1,000 fils 100 cents 1,000 fils 100 piastres 100 cents 100 tambala 100 sen 100 laari 100 cents 5 khoums 100 cents 100 centavos 100 mongo 100 cents

Morocco Nepal Netherlands New Zealand Nicaragua Niger Norway Oman Pakistan Papua New Guinea Paraguay Peru Philippines Poland Portugal Qatar Romania Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands

Dirham Rupee Euro Dollar Cordoba Franc Krone riyal-omani Rupee Kina Guarani Inti Peso Zloty Euro Riyal Leu Riyal Franc Dinar Rupee Leone Dollar Koruna Euro Dollar 13

100 centimes 100 paisa 100 cents 100 cents 100 centavos 100 centimes 100 ore 1,000 baiza 100 paisa 100 toea 100 centimos 100 centimes 100 centavos 100 groszy 100 cents 100 dirhams 100 bani 100 dirhams 100 centimes 100 paras 100 cents 100 cents 100 cents

100 cents 100 cents

Somalia South Africa South Korea Spain Sri Lanka Sudan Suriname Sweden Switzerland Syria Taiwan Tanzania Thailand Togo Trinidad & Tobago Tunisia Turkey Uganda United Arab Emir. United Kingdom United States Uruguay Venezuela Vietnam Western Samoa Zambia

Shilling Rand Won Euro Rupee Dinar Guilder Krona Franc Pound Dollar Shilling Baht Franc Dollar Dinar Lira Shilling Dirham Pound Dollar Peso Bolivar Dong Tala Kwacha 14

100 cents 100 cents 100 chon 100 cents 100 cents

100 cents 100 ore 100 centimes 100 piastres 100 cents 100 cents 100 satang 100 centimes 100 cents 1,000 millimes 100 kurus 100 cents 1,000 fils 100 pence 100 cents 100 centesimos 100 centimos 100 xu 100 sene 100 ngwee

Zimbabwe

Dollar

100 cents

Source: www.rbi.org.in

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1.3 Introduction of the exchange rates

Currency exchange rate refers to the value of foreign nations currency in terms of the home nations currency. The exchange rate between two currencies determines how much one currency is worth in terms of the other. There is always fluctuation in exchange rates. Different factors such as social, political and economical factors tend to affect the currency exchange rates in the currency market. The article below shares brief introduction to exchange rate and the types of currency exchange rate. So, read on to get information about currency rate exchange. There are two types of currency exchange rates. The first one is the spot exchange rate that denotes the current exchange rate while the other one is the forward exchange rate. Forward exchange rate basically refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. Just going ahead with the introduction to online currency exchange rate, an exchange system quotation is given by stating the number of units of quote currency that can be exchanged for one unit of base currency. However, there is a market convention that determines which is the base currency and which is the term currency. Direct quotation or price quotation in currency exchange rate basically refers to the quotes that use a country's home currency as the price currency while indirect quotation specifically refers to the quotes that use a country's home currency as the unit. If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is specified by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets mainly by banks. Moving ahead with the introduction to currency exchange rate online, the exchange rate is never constant. It always fluctuates. A market based exchange rate will change whenever the values of either of the two component currencies change. A currency will tend to become more valuable whenever demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply. Increased transaction results in increased demand for a currency. However, the transaction demand for money is extremely correlated to the country's level of business activity, gross domestic product (GDP), and employment levels.

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1.4 Currency trade on Indian stock market:

US DOLLAR:
Currency Name : Currency Symbol : US Dollar $

The history of the US Dollar The currency of the United States can be traced back to 1690 before the birth of the country when the region was still a patchwork of colonies. The Massachusetts Bay Colony used paper notes to finance military expeditions. After the introduction of paper currency in Massachusetts, the other colonies quickly followed. Various British imposed restrictions on the colonial paper currencies were in place until being outlawed. In 1775, when the colonists were preparing to go to war with the British, the Continental Congress introduced the Continental currency. However, the currency did not last long as there was insufficient financial backing and the notes were easily counterfeited. Congress then chartered the first national bank in Philadelphia - the Bank of North America - to help with the government's finances. The dollar was chosen to become the monetary unit for the USA in 1785. The Coinage Act of 1792 helped put together an organised monetary system that introduced coinage in gold, silver, and copper. Paper notes or greenbacks were introduced into the system in 1861 to help finance the Civil War. The paper notes used several different techniques including a Treasury seal and engraved signatures to help diminish counterfeiting. In 1863, Congress put together the national banking system that granted the US Treasury permission to oversee the issuance of National Bank notes. This gave national banks the power to distribute money and to purchase US bonds more easily whilst still being regulated. The Federal Reserve Act of 1913 created one central bank and organised a national banking system that could keep up with the changing financial needs of the country. The Federal Reserve Board created a new currency called the Federal Reserve Note. The first federal note was issued in the form of a ten dollar bill in 1914. Finally, a decision by the Federal Reserve board was made to lower the manufacturing costs of the currency by reducing the actual size of the notes by 30%. The same designs were also printed on all dominations instead of individual designs. The designs of the notes would not be changed again until 1996 when a series of improvements were carried out over a ten-year period to prevent counterfeiting

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G.B.P. (Great Britain Pound)

Currency Name Currency Symbol Pound

British pound, having the currency code GBP and numeric code 826 as per the ISO 4217 standard, is the official currency of the countries England, Scotland, Wales and Northern Ireland that form the Great Britain. The other names by which the currency is known as are sterling, British pound sterling and pound sterling, the last one being the official full name of the currency. "" sign is used to denote the currency which is taken from the Latin word Librae that was used for pound in the duodecimal monetary system. The British pound is divided into 100 equal pence. The pound sterling is said to be the oldest currency that is being used currently. It is also ranked among the top most important currencies of the world along with United States dollar, Euro and Japanese yen. Another important fact about the currency of United Kingdom is that it bears the highest value among the major currency units of the world. Scottish pounds are often confused as a separate currency but British pounds and the Scottish pounds are interchangeable, posses equal value and are accepted throughout the Great Britain. Thats why it can be said that they are one and the same. British pound is one of the most important currencies in the world. The facts that it is the oldest currency currently being used and also a highly valued currency among the major currencies of the world help it earn a third place with Japanese yen in the list of the most heavily traded currencies of the world. Few economies also tend to peg their currencies like Falkland Islands pound, Gibraltar pound and Saint Helenian pound to the pound sterling. One of the reasons for the heavy trade in the currency is the location of the largest foreign exchange trading hub i.e. London in the area where pound sterling is used as a currency. The currency uses a floating rate regime and can be easily traded in the foreign exchange markets.

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The EURO Currency name: Euro Symbol:

The euro is the single currency shared by (currently) 17 of the European Union's Member States, which together make up the euro area. The introduction of the euro in 1999 was a major step in European integration. It has also been one of its major successes: around 330 million EU citizens now use it as their currency and enjoy its benefits, which will spread even more widely as other EU countries adopt the euro. The euro is the single currency shared by (currently) 17 of the European Union's Member States, which together make up the euro area. The introduction of the euro in 1999 was a major step in European integration: around 330 million EU citizens now use it as their currency. When the euro was launched on 1 January 1999, it became the new official currency of 11 Member States, replacing the old national currencies such as the Deutschmark and the French franc in two stages. First the euro was introduced as an accounting currency for cash-less payments and accounting purposes, while the old currencies continued to be used for cash payments. Since 1 January 2002 the euro has been circulating in physical form, as banknotes and coins. The euro is not the currency of all EU Member States. Two countries (Denmark and the United Kingdom) have opt-out clauses in the Treaty exempting them from participation, while the remainder (several of the more recently acceded EU members plus Sweden) have yet to meet the conditions for adopting the single currency. Euro zone countries: 1. Germany 2. France 3. Italy 4. Spain 5. Netherlands 6. Belgium 7. Austria 8. Greece

9. Finland 10. Portugal 11. Ireland 12. Slovakia 13. Luxembourg 14. Slovenia 15. Cyprus 16. Malta

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Japanese yen Currency Name: Yen Currency Symbol:

The yen is the official national currency of Japan, and is denoted by JPY. The Meiji government introduced the yen to replace the previous complex system of the Edo Period, where there was no fixed exchange rate between the various coins used. The New Currency Act of 1871 established the yen as the official unit of currency and moved Japan onto the Gold Standard. It was named the yen becaus e of the direct translation to round object. In April of 1949, the yen was pegged at 1 USD = 360, where it stayed until 1971. At this time, however, the Bretton Woods system collapsed. This international monetary system, based on stable and adjustable exchange rates, was reluctantly switched to a regime of floating exchange rates and the value of the yen started to float as it still does today. Moodys Rating Aa S&P Rating AAA Sovereign credit ratings play an important part in determining a countrys access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets.

Source: Investopedia
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1.5 Bretton Woods system

Since the end of World War II, the U.S. dollar has enjoyed a unique and powerful position in international trade. The old global financial order is, well, old. Established in 1944 and named after the New Hampshire town where the agreements were drawn up, the Bretton Woods system created an international basis for exchanging one currency for another. It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, now known as the World Bank. The former was designed to monitor exchange rates and lend reserve currencies to nations with trade deficits, the latter to provide underdeveloped nations with needed capital although each institution's role has changed over time. Each of the 44 nations who joined the discussions contributed a membership fee, of sorts, to fund these institutions; the amount of each contribution designated a country's economic ability and dictated its number of votes. In an effort to free international trade and fund post war reconstruction, the member states agreed to fix their exchange rates by tying their currencies to the U.S. dollar. American politicians, meanwhile, assured the rest of the world that its currency was dependable by linking the U.S. dollar to gold; $1 equalled 35 oz. of bullion. Nations also agreed to buy and sell U.S. dollars to keep their currencies within 1% of the fixed rate. And thus the golden age of the U.S. dollar began.

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1.6 Structure of Currency trading

Forex Market Structure
The Forex market is made up of three classes of players: 1. Brokers (dealers and market makers are included here) 2. Institutional traders e.g. investment banks and high net-worth investors like Warren Buffett and George Soros 3. Individual (retail) traders

1. Brokers
If you go to any Bureau de Change to change your local currency to a foreign one and vice versa, you will notice that there is a difference between the price at which you buy a foreign currency with your local one, and the price at which you exchange a foreign currency for your local one. This difference is the profit made by the Bureau de Change operators on the transaction. The same applies to online Forex trading. Currencies and other online-traded financial instruments have two quoted prices: the BID and ASK price. For example, a quote of Euros to US dollar is expressed in this way: EUR/USD= 1.3480/1.3483 (Bid/Ask) The difference between the BID and ASK price is the SPREAD, which in this case, is 1.3483 1.3480 = 3 pips. For some currencies, the spread is as much as 50 pips. The value of the spread is determined by transaction volume. Anytime a trader opens a trade position, the SPREAD is instantly and automatically deducted from the traders account. It does not matter if a trader makes or loses money in that trade; the broker ALWAYS walks away with his money. Only you can choose the broker, so make the right decision.

2. Institutional Traders
Financial institutions by virtue of their operations have a large pool of funds running into billions of dollars, from where they can easily hire a team of experienced trading experts (some with more than 25 years experience). In addition, they can access premium news services from Bloomberg and Reuters, which deliver the news about five before it gets to individual traders. This service costs thousands of dollars a month, effectively priced out of the reach of most retail traders. The profits of this group of traders are effectively derived from the 95% of retail traders who lose money in Forex, and this number is swelling by the day. In Forex, a winning trade somewhere is usually at the expense of another trader who held a contrary (and hence a losing) position in the market. You can only receive when someone else 22

gives. So a trader can only receive profits when someone else gives away the profits (that is, suffers losses).

3. Individual Traders
Lack of proper training and inexperience causes 95% of traders in this category lose money. Their losses pay for the buildings, the cars, the fat salaries and the end-of-year profits of financial institutions and other successful traders! Of course, whether they make profits or losses, their spreads go to the brokersnaturally. So at the end of the day, the individual traders who lose money trading Forex only end up servicing the top 5% individual traders, the brokers and the big dogs (the financial institutions.

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CHAPTER: 2 LITERATURE REVIEW

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2.1 Factors affecting Indian rupee

Inflation rate

Others GDP Natural Calamities Political Factors

Interest rates

Factors Affecting Indian I rupee

OIL Prices

Current A/C Deficits

1. Inflation Rate:

F.D.I.

F.I.I.

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which is the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can't buy the same goods it could beforehand.

2. Interest Rates:
Over the years another important factor for movements in exchange rates has been interest differential i.e. the difference in interest rates between major countries. Currencies with higher interest rates attract large no. of investors seeking a better opportunities for their investment. This makes the currency more attractive as a form of investment and increases the demand for the currency. The opposite relationship exists for decreasing interest rates i.e. lower interest rates tend to decrease exchange rates. The interest rate decisions are taken in India by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate.

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3. Current A/C deficits:

The current account is a record of the balance of trade between a country and its other partners all over the world. It reflects all payments & receipts between countries for purchase or sale of goods, services and payment / receipt of interest and dividends. The current account deficit indicates that the country is spending more on international trade than it is earning and in order to balance this deficit it is borrowing capital from foreign sources.

4. Foreign Direct Investment:

The demand for domestic currency will increase as foreign investors have to sell their currency in order to buy the local currency. This increased demand will result in the increase in value of the same. Inherently investors make investment decisions based on two driving factors "the level of risk" and corresponding "level of return". When the expected levels of risk-return ratio are high the investors are attracted and demand for assets is increased. Central banks monitor and control the flow of money in and out the country. Therefore most of the countries hold significant forex reserves. For e.g. China and Russia alone hold well over a trillion U.S. dollars in their foreign currency reserves.

5. Foreign Institutional Investors:

Mutual funds, insurance companies, pension funds, university funds, investment trusts, endowment funds and charitable trusts incorporated outside India but investing in equity and debt securities in the country are known as FIIs. They collect money from individuals and corporate (primarily from countries belonging to the European and American continents), and invest it in financial instruments worldwide, with India being one of the targeted markets. FII who want to invest in the Indian Markets have to register with the SEBI (Security and Exchange Bureau of India) and also from the RBI to maintain a foreign currency account to bring in and take out the funds and also a rupee bank account to make the transactions. To understand the implications of FII on the exchange rates we have to understand how the value of one currency goes up (appreciates) or goes down against the other currency. The simple way of understanding is through Demand and Supply. If say US imports from India it is creating a demand for Rupee thus the Indian rupee appreciates the dollar. If India imports then the dollar appreciates the Indian rupee. Now considering FIIs for every dollar that they bring into the country, there is a demand for rupee created and the RBI has to print and release the money in the country. Since the FIIs are creating a demand for rupee, it appreciates the dollar. Thus if for e.g. if prior to the demand the exchange rate was 1 USD = Rs 40, it could become 1 USD = Rs 39 after they invets. Similarly when FII withdraw the capital from the markets, they need to earn back the green buck (USD) so that leads to a demand for dollars the rupee depreciates. 1 USD goes back to Rs. 40. Thus FII inflows make the currency of the country invested in appreciate 26

6. Oil prices:
A large portion of Indias import payment is mainly for payment of oil. Internationally, crude prices are named as BRENT, NYMEX, and Dubai Crude. Whenever there is any hike in the oil price per barrel, the Indian Rupee depreciates against the US Dollar. As such, the Indian Government buys more USD against INR to honour the import liability, resulting in heavy demand for USD. Consequently, the Indian rupee depreciates against USD. The Indian currency market largely depends on the price of Dubai Crude. It is observed that USD appreciates at the end of the month when compared to other days of the month, primarily because of the month-end demand of USD in the wake of payment for imported oil. However, todays market is mature enough, with players of foreign exchange covering themselves against this type of expected fluctuations in the market. Whenever FIIs book profits by selling their shares, the BSE index falls, and at the same time INR depreciates against the USD. On April 12, 2006, the BSE index fell by more than 300 points due to heavy selling by FIIs, and on the same day the crude price also shot up to around USD70 per barrel. The Indian Rupee depreciated by 45- 50 paise on the same day, owing to the impact of these two important factors.

7. Others:
GDP: Recall the formula for gross domestic product, C + I + G + (Ex - Im). The expression (Ex - Im) equals net exports, which may be either positive or negative. If net exports are positive, the nation's GDP increases. If they are negative, GDP decreases. All nations want their GDP to be higher rather than lower, so all nations wan their net exports to be positive. GDP affects the foreign exchange rate like this: 1. If GDP for a country is strong, its currency will tend to rise. 2. If GDP for a country is weak, its currency will tend to weaken.

Natural calamities:
Usually, currencies weaken right after a natural disaster because of uncertainty about how much economic damage was actually done, according to Barclays Wealth. However, currencies can strengthen again once other countries start funding relief efforts, but the currency can then weaken once internal banks try to alleviate economic hardship (by doing things like lowering the world interest rates). It all depends on the specific countrys situation, so there are a number of different scenarios. The following examples illustrate what has happened in the last decade.

Political factors:
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The political conditions of any scale can have a huge impact on the rate of exchange. The instability in political condition will influence the currency exchange rates in a negative way. However, economic growth of a country also increases the currency exchange rates. Yet this is one of the other factors affecting currency exchange rates.

2.2Causes of depreciation in Indian rupee

Demand supply rule

Fiscal Deficit

Causes of Indian rupee Depreciate

Speculators

Weaker Capital Markets

1. Demand Supply Rule

Rupee quotation follows the simple economic rule of Demand & Supply. If there is more demand for dollars in India than the supply for it, Rupee would depreciate and vice-versa. Demand of dollars may be created by Importers requiring more dollars to pay for their imports, FIIs withdrawing their investments and taking the dollars outside India, etc. On the other hand, supply is created by exporters bringing in more dollars from their revenues, NRIs remitting more funds, FIIs bringing more dollar in India to spur their investments.

2. Fiscal Deficit
How would others feel of your financial position if you earn Rs. 100,000 a year, but end up spending Rs. 110,000? The excess of your expenditures over your total income is called Fiscal Deficit. In 28

order to bridge a Fiscal Deficit, you may end up taking a loan of Rs. 10,000. The more loan you take, the more riskier you would become in the eyes of lenders. This is exactly the case in India. India is currently spending more than it earns via taxes resulting in a mounting fiscal deficit. The major brunt of this spending is going into subsidies. With mounting fiscal deficit, foreign investors start feeling uncomfortable and pull their money out of India resulting in rupee depreciation.

3. Weaker Capital Markets

If the capital markets (share markets) are on a boom, there is a continuous flow of dollars into India which adds to the overall supply of dollars in the country. Unfortunately, the current situation is opposite. Capital markets are at status-quo for a couple of years and hence not influencing the supply side of dollars in the country. All in all weaker supply and excessive demand is resulting in sharp depreciation of Rupee

4. Speculators
Once a trend is set, speculators tend to punt against the rupee adding further to the bearish tone of Rupee.

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2.3 Impact of Indian rupee depreciation

Impact of Indian rupee depreciation

Positive Impact

Negative Impact

Exporters

NRIs become richer

Tourism industry

Expensive Imports

Oil Contagion

Higher inflation

Poor returns for FIIs

Repayment of Loans

Foreign Education

Foreign Holidays

A) Positive Impact: 1) For Exporters:

Exporters are perhaps the biggest beneficiaries of the Rupee depreciation as every dollar of their sale fetches them more Rupees. Hence if they dont reduce their prices, with the same quantity of sales, they earn more in terms of Indian Rupees.

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2) NRIs become richer

Believe it or not, where ever NRIs are, most of them count their net worth in Rupee terms and find depreciating Rupee to their advantage. For example, a NRI earning 100,000 dollars, when converts his earning in Indian Rupees would be earning equivalent of Rs. 56,00,000 (when USD is Rs. 56) compared to Rs. 45,00,000 (when USD was Rs. 46). This adds additional Rs. 11,00,000 to their kitty due to currency movements. Depreciating Rupee hence gives NRIs a big incentive to remit more funds into India for investment purposes, adding to Indias forex reserves.

3) Tourism industry
With a depreciating rupee, holidays in India become cheaper. Take for example, a holiday package in Kerala backwaters costs around Rs. 200,000 for 10 days stay. When Dollar was quoting Rs. 45, this holiday would cost around $4400. With Dollar quoting at Rs. 56, the same holiday package would cost $3500, a whopping $900 cheaper! This promotes foreigners to visit India as India becomes an attractive Tourism spot owing to its financial competitiveness.

B) Negative impact:
1) Expensive Imports Quite opposite to exports, a depreciating Rupee would mean that every dollar which we have to pay for our imports, costs more. For example, if we have to pay $100K for an import, it would cost Rs. 45 lacs when dollar is at Rs. 45 and would cost Rs. 56 lacs when the dollar is Rs. 56. Though it means that the imported commodity / product would become costly in India and any product with elastic demand would result in lowering the demand for such imported products. However, in case of India most of our imports are of products which are inelastic, e.g. Oil, luxury products, etc. and hence despite of rising import prices, our imports dont come down. 2) Oil Contagion Oil prices in India are a subject of two factors - international crude oil prices and the currency factor. A barrel of oil costing in International market at $100, would cost Rs. 4500 in India when dollar is quoting at Rs. 45 and Rs. 5600 when dollar is quoting at Rs. 56. Hence even though oil prices may decline 10% in International markets, currency depreciation may offset this decline resulting in high oil prices in India. As a result, high oil prices creeps into the prices of almost every commodity and product in the economy. Oil plays a fundamental role in Indias economy as it supports the fundamental structure of all Industries 31

by fuelling up the energy requirements. A higher oil price would result in higher cost of production and higher logistics / transportation costs. 3) Higher inflation This paragraph gels in perfectly with the above points which stresses upon imports becoming expensive with a depreciating Rupee. And a direct consequence of it, the inflation in the economy shoots up ! Higher inflation results in commodities becoming more expensive. Countries which import their essential commodities suffer more than countries who are major exporters. Unfortunately, as mentioned in above paragraphs, India is a major importer of Oil which tends to hit the cost structure of the economy and fueling the inflation scenario in the economy. 4) Poor returns for FIIs When it comes to FIIs, they need to report returns on their Indian portfolio in their local currency. For example, FIIs from USA would need to convert their Indian portfolio in US Dollar terms. Lets assume that a particular FII has a portfolio of Rs. 70 million in India. When they value their portfolio in dollar terms (when dollar is at 45 Rs.), the value would be $1.55 million. However, the same portfolio would be valued at $1.25 when dollar is at Rs. 56, shaving off a neat $300K from their valuation owing to currency movements ! This at times triggers FIIs to sell out of their holdings to prevent any further losses and exit from India resulting in large scale withdrawal of funds from the country. 5) Repayment of Loans A couple of years ago, the option of borrowing cheap money from overseas was the hottest and the most fashionable financial option which every capable company was exploring. No one even dreamed that a time may come that owing to Rupee depreciation, they may be messed up badly, making their cost of borrowing much more expensive than what they could have borrowed within India. Not that the interest rates on external borrowings went up, but the impact of currency depreciation meant that the borrowing companies had to pay more Rupees to repay their dollar denominated loan. This completely screwed up their financial computations, whereby some companies even ended up defaulting on their loan payments.

6) Foreign Education Believe it or not, there are more and more Indian students taking admission in foreign university. However, foreign education doesnt come cheap and on an average can cost over 40,000 dollars. When dollar was at 45 levels, the same foreign education used to cost around Rs. 18 lacs. Now it costs over Rs. 22.5 lacs. This is not a small difference for a student who has to take an education loan to sponsor his / her education and then repay it with interest. 32

7) Foreign Holidays This is last thing on my mind today. A holiday package to Swiss costing $3000 would increase from around Rs. 1.4 lacs to Rs. 1.7 lacs per person. For a family of two, it adds over Rs. 60K to the cost ! However, foreign holiday is a luxury which not many can afford and the ones who can afford it, additional 60K perhaps may not be a big dent on their savings.

Source: International Journal of Economics and Financial Issues

33

CHAPTER:3 RESEARCH METHDOLOGY

34

RESEARCH METHODOLOGY

Objectives of research Methodology To find out the trend of the factors affect the Indian rupee depreciated on Indian economy To Study the exchange rate affect the Indian economy. To Study the relationship between inflation rate and exchange rate. To Study the relationship between interest rate and exchange rate. To Study the relationship between oil prices and exchange rate. To Study the FIIs and exchange rate. To Study the FDI and exchange rate.

Type of research methodology used: Exploratory research

SOURCE OF DATA: Secondary data: Secondary data means, the data has already collected and analyzed by someone else. Various sources of secondary data are as following. Internet-RBI Newspapers Limitation of the study: In this study trend is analysed on monthly basis Daily Basis Analysis can give accurate trend but it is a tedious job.

35

CHAPTER: 4 DATA ANALYSIS

36

4.1 Inflation Rate vs. Exchange Rate Month &Year Exchange rates Inflation
May-11 June-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 June-12 July-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80 54.42 9.74 9.56 9.51 9.36 9.78 10 9.87 9.46 7.74 7.23 7.56 7.69 7.5 7.55 7.58 6.87 7.55 8.07 7.45 7.24 7.18 6.62 6.84

37

Exchange rates
60 50 Exhange rates 40 30 20 10 0 Exchange rates

Months

10 9 8 7 6 5 4 3 2 1 0

Inflation rates

Inflation

Months

60 Exchange rate & Inflation 50 40 30 20 10 0 Feb/11 Exchange rates Inflation Linear (Exchange rates) Linear (Inflation)

Sep/11

Apr/12 Months

Oct/12

May/13

38

From the above chart, there are two variables in above chart the two variables are; inflation and exchange rates. The chart trend line shows that as inflation decreases exchange rate in increasing order The highest exchange rate is 55.49 and the highest inflation 10% in above chart. Low inflation rates means higher demand in market including demand from foreign markets. This is translated in the price quoted for imported items. Thus, as import is increased so does money outflow. This means more foreign currency are needed (bought) to buy imported items and relatively the value of local currency rates will be depreciated. It is benefited to the exporters but not for the importers.

Source: www.rbi.org.in
39

4.2 Interest Rate vs. Exchange Rate

Month and year
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13

Exchange rates
44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80 54.42

Interest rates
7.15 7.38 7.51 7.97 8.11 8.26 8.58 9.04 8.92 8.81 9.17 8.62 8.27 8.14 8.05 7.99 7.92 8 8.04 8.05 8 7.8 7.9

40

Interest rates
10 9 8 7 6 5 4 3 2 1 0 Interest rates

Interest rates

Months and years

Exchange rates
60 50 Exhange rates 40 30 20 10 0 Exchange rates

Months

Interest rates
60 50 Interest rate 40 30 20 10 0 Feb/11 Sep/11 Apr/12 Oct/12 May/13 Exchange rates Interest rates Linear (Exchange rates) Linear (Interest rates)

Month and year

41

From the above chart, there are two variables in above chart the two variables are; Interest rates and exchange rates. The chart trend line shows that as interest rate fluctuated but the exchange rate increases. The highest exchange rate is 55.49 and the highest interest rate 9.04% in above chart. The interest rate influences the exchange rate because it influences the demand and supply of currencies on the foreign exchange markets. A good deal of the trade in foreign currencies is for speculative purposes traders moving funds from one currency to another to take advantage of price movements or to take advantage of better returns in different countries. Currencies with higher interest rates attract large no. of investors seeking a better opportunities for their investment. This makes the currency more attractive as a form of investment and increases the demand for the currency. The opposite relationship exists for decreasing interest rates i.e. lower interest rates tend to decrease exchange rates.

Source: www.rbi.org.in
42

4.3 Current Account VS. Exchange Rate

Month & year
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 Jun-12

Export
26522.4 26511.6 26340.7 24739.4 26597.6 23558.3 23217.3 25282.5 25208.2 24918.9 28253.1 23487.2 25681.4 25067.2

Import
45281.9 40870.2 41059.7 39950.3 39765.3 41226.9 39114.8 39663.4 42973.9 40183.1 42326.4 37115.2 41947.1 35370.6

Trade Balance
-18759.5 -14358.6 -14719 -15210.9 -13167.7 -17668.6 -15897.5 -14380.8 -17765.7 -15264.3 -14073.2 -13628 -16265.8 -10303.4

Exchange rate
44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94

Trade balance
0 -5000 -10000 -15000 -20000

Trade balance

Months and year

43

Exchange rates
60 50 40 Rates 30 20 10 0 Jun/11 Aug/11 May/11 Oct/11 May/12 Sep/11 Nov/11 Dec/11 Feb/12 Mar/12 Exchange rates

months and year

From the above chart, there are two variables in above chart the two variables are; Current a/c deficit and exchange rates. The chart trend line shows that as current a/c balance is in negative figure and that is increases, the exchange rate increases. The current account deficit indicates that the country is spending more on international trade than it is earning and in order to balance this deficit it is borrowing capital from foreign sources.

Source: www.rbi.org.in
44

Apr/12

Jun/12

Jul/11

Jan/12

4.4 Foreign Institutional investors VS. Exchange Rate Months and years Fiis Exchange rates
May-11 June-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 June-12 July-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 1554 4614 1771 3471 -117 2172 1707 3066 6236 9655 -365 133 1038 789 3969 4113 8510 3531 3373 6310 9295 6664 44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80

45

Fiis
10000 8000 6000 Fiis 4000 2000 0 -2000 Month

Exchange rates
60 50 40 Rates 30 20 10 0 May/11 May/12 Aug/11 Sep/11 Oct/11 Nov/11 Dec/11 Mar/12 Feb/12 Apr/12 Jun/12 Jun/11 Jul/11 Jan/12 Exchange rates

months and year

12000 10000 Exchange rates and fiis 8000 6000 Fiis 4000 2000 0 Feb/11 -2000 Exchange rates

Sep/11

Apr/12 Months

Oct/12

May/13

46

From the above chart, there are two variables in above chart the two variables are; Foreign Institutional Investors and exchange rates. The chart trend line shows that as Foreign Institutional

Investors is both in positive & negative figure and that is fluctuated, but the exchange rate increases.FII affects the stock exchange, it is investment type in India. Through FII you have to invest two type s 1.Equity 2. Debt. If say US imports from India it is creating a demand for Rupee thus the Indian rupee appreciates the dollar. If India imports then the dollar appreciates the Indian rupee. Now considering FIIs for every dollar that they bring into the country, there is a demand for rupee created and the RBI has to print and release the money in the country. Since the FIIs are creating a demand for rupee, it appreciates the dollar. Thus if for e.g. if prior to the demand the exchange rate was 1 USD = Rs 40, it could become 1 USD = Rs 39 after they invets. Similarly when FII withdraw the capital from the markets, they need to earn back the green buck (USD) so that leads to a demand for dollars the rupee depreciates. 1 USD goes back to Rs. 40. Thus FII inflows make the currency of the country invested in appreciate.

Source: www.rbi.org.in
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4.5 Foreign Direct Investment vs. Exchange Rate

Month and year
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13

Exchange rates
44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80

FDI
2433 3122 1286 1363 576 4385 2637 1851 1210 1129 1542 244 484 871 78 1647 2619 967 5206 149 3894 3207

48

FDI
6000 5000 4000 FDI 3000 2000 1000 0

Month

Exchange rates
60 50 40 Rates 30 20 10 0 Aug/11 Oct/11 May/12 May/11 Sep/11 Nov/11 Dec/11 Feb/12 Mar/12 Apr/12 Jun/12 Jun/11 Exchange rates

Jul/11

months and year

6000 5000 Exchange rate and FDI 4000 3000 2000 1000 0 Feb/11 FDI Exchange rates Linear (FDI) Linear (Exchange rates)

Sep/11

Apr/12 Month

Oct/12

Jan/12

May/13

49

From the above chart, there are two variables in above chart the two variables are; foreign direct Investment and exchange rates. The chart trend line shows that as Foreign direct Investment is fluctuated, it peak in Nov 12 and lowest in July12 but the exchange rate increases. The demand for domestic

currency will increase as foreign investors have to sell their currency in order to buy the local currency. This increased demand will result in the increase in value of the same. When the expected levels of riskreturn ratio are high the investors are attracted and demand for assets is increased. Central banks monitor and control the flow of money in and out the country. Therefore most of the countries hold significant forex reserves. For e.g. China and Russia alone hold well over a trillion U.S. dollars in their foreign currency reserves.

Source: www.rbi.org.in
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4.6 Oil prices vs. Exchange rate Months and years

May-11 June-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 June-12 July-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13

OIL Prices 100.9 96.26 97.3 86.33 85.52 86.32 97.16 98.56 100.27 102.20 106.16 103.52 94.66 82.30 87.90 94.13 94.51 89.49 86.53 87.86 94.76 95.31 92.94

Exchange rates
44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80 54.42

51

Exchange rates
60 50 40 Rates 30 20 10 0 Jun/11 Aug/11 May/11 Oct/11 May/12 Sep/11 Nov/11 Exchange rates

Feb/12

Dec/11

months and year

OIL PRICES
120 100 oil prices 80 60 40 20 0 OIL PRICES

Months and years

120 100 80 OIl prices 60 40 20 0 Feb/11 OIL PRICES

Mar/12

Apr/12

Sep/11

Apr/12 Month and year

Oct/12

May/13

52

Jun/12 Exchange rates Linear (OIL PRICES) Linear () Linear (Exchange rates)

Jul/11

Jan/12

From the above chart, there are two variables in above chart the two variables are; Crude oil prices and exchange rates. The chart trend line shows that as Crude oil prices is Increases, it peak in Mar 12 and lowest in Sept but the exchange rate increases. If crude oil price has been increases the oil products like petrol , diesel etc. prices also increase and then inflation has also increase as well as the exchange rate also increase.

Source: www.petroleum.nic.in/

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CHAPTER: 5 FINDINGS & CONCLUSION

54

Findings:
Through study it is found that inflation is highly affecting factor for Indian rupee depreciation. The Current Account deficit is having inverse relationship with exchange rate, it means with increase in deficit with decreasing rate, exchange rate increases in increasing order. FII is having little effect on the economy but it does affect mainly, the stock market like BSE, NSE etc. because trough financial market foreign investors invests in India. FDI also highly affect the exchange rates because it is investment for manufacturing. FDI decrease will lead to decrease in GDP and in turn inflation will increase which ultimately trouble the public at the end. Interest rate affect significantly the Indian economy if it increases then exchange rate also increases, if interest rate on investment increases from 8% to 9% then it will lead to decrease in the local currency value hence, investors have to paid more.

55

Conclusion:
The purpose for the study or preparing the project to find out the trend of the factors affecting on Indian rupee depreciated and its impact on the Economy. From the study of trend analysis it is found that Inflation, Interest rates, FDI, Current A/C deficit & oil prices are highly affecting the Indian Rupee Depreciated and having least effect of FII. This Conclusion further Validated using various statistical tools like Correlation, Regression.

56

Annexure
Months and years May-11 June-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 June-12 July-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Exchange rates 44.90 44.81 44.39 45.31 47.69 49.20 50.67 52.38 51 49.18 50.36 51.69 54.33 55.94 55.42 55.49 54.35 55.09 54.78 54.64 54.22 53.80 54.42 9.74 9.56 9.51 9.36 9.78 10 9.87 9.46 7.74 7.23 7.56 7.69 7.5 7.55 7.58 6.87 7.55 8.07 7.45 7.24 7.18 6.62 6.84 Inflation Interest rates 7.15 7.38 7.51 7.97 8.11 8.26 8.58 9.04 8.92 8.81 9.17 8.62 8.27 8.14 8.05 7.99 7.92 8 8.04 8.05 8 7.8 7.9 Trade Balance -18759.5 -14358.6 -14719 -15210.9 -13167.7 -17668.6 -15897.5 -14380.8 -17765.7 -15264.3 -14073.2 -13628 -16265.8 -10303.4

57

Months and years May-11 June-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 April-12 May-12 June-12 July-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13

Fiis

FDI

OIL Prices

1554 4614 1771 3471 -117 2172 1707 3066 6236 9655 -365 133 1038 789 3969 4113 8510 3531 3373 6310 9295 6664

2433 3122 1286 1363 576 4385 2637 1851 1210 1129 1542 244 484 871 78 1647 2619 967 5206 149 3894 3207

100.9 96.26 97.3 86.33 85.52 86.32 97.16 98.56 100.27 102.20 106.16 103.52 94.66 82.30 87.90 94.13 94.51 89.49 86.53 87.86 94.76 95.31 92.94

58

Bibliography
1. www.rbi.org.in 2. www.investopedia.in 3. International Journal of Economics and Financial Issues
4. www.petroleum.nic.in/

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