Hi, can you explain how the relation between inflation and exchange rate works. >>> which means that our exchange rate is not increasing relative to the high inflation that we have compared to the rest of the partners.
Hi Abhed, the main relationship between exchange rates and inflation works in this manner wherein high inflation leads to high currency depreciation (as high prices of goods and services makes imports cheaper and makes exports costlier). However, in India’s case what has been observed is that the currency depreciation has not been allowed to the extent to the movements in inflation rates.
Hi, can you explain how the relation between inflation and exchange rate works. >>> which means that our exchange rate is not increasing relative to the high inflation that we have compared to the rest of the partners.
Hi Abhed, the main relationship between exchange rates and inflation works in this manner wherein high inflation leads to high currency depreciation (as high prices of goods and services makes imports cheaper and makes exports costlier). However, in India’s case what has been observed is that the currency depreciation has not been allowed to the extent to the movements in inflation rates.
So if the RBI is trying to manage the currency, how is that bad with respect to inflation specifically. I understand it's repurcussion otherwise