CURRENT AFFAIRS

Detailed explanation-1: -Detailed Solution. The correct answer is Exports Cheaper and Imports Costlier. When the rupee depreciates, it loses value with respect to the dollar. This means it takes more rupees to exchange with a dollar.

Detailed explanation-2: -When the rupee depreciates, its purchasing power in other countries drops. So, imported goods and services will become more expensive. If India can produce substitutes for the products it imports, the rise in prices of imported goods might help boost domestic industries.

Detailed explanation-3: -Depreciation reduces the value of a country’s currency when compared with the currency of other countries. Depreciation discourages imports because the imported goods become more expensive due to reduction in the value of currency. As the goods become more and more expensive it leads to inflation.

Detailed explanation-4: -A high fiscal deficit will lead to the lowering of the sovereign ratings and hence reduce the demand for domestic currency in the international markets. This will lead to the depreciation of the currency.

Detailed explanation-5: -The rupee has depreciated on account of deteriorating current-account deficit as India is importing more goods and services than exporting implying foreign currency are flying out of India.