Indian currency, rupee is falling down day by day. It is expected that it may also fall in near future. The main reason behind this fall is the increasing Current Account Deficit or Trade Deficit. Current Account Deficit or Trade Deficit means the excess of import over the export.Current Account Deficit increases problems for the economy when it becomes more than 2.5% of the GDP.It becomes the main reason for the devaluation of the money.It becomes good for the export but bad for the import.
The import limit of India is increased because of the day by day increase in the import of crude oil and Gold.Government has increased the tax on Gold to reduce the consumption.But Government can’t do any thing to reduce the consumption and demand of crude oil.If government will increase the price of diesel then it may become one of the solution to reduce its demand.
The policies which government has announced on 25th June to stop the devaluation of money such as increase in the limit of different types of bond purchased by foreign investors, reduce the lock in period
for the foreign investor which invest in bonds ,increase in the limit of debt which Indian companies take from foreign etc.I think that these steps are not the permanent solution because all the steps are much more related to increase the dollar reserve means to increase the FIIs. To bring the stability in the economy ,Government has to make good policies to increase the FDI investment.