The than 0.05, hence H1 is accepted. Therefore,

The
study was undertaken to know about the relationship between Indian Currency
growth Pre and Post period of Liberalization and the impact of various
macro-economic variables on depreciation of Indian rupee. On the basis of the
analysis, the following findings are obtained:

·        
There is a significant relationship between
Indian currency during Pre and Post period of Liberalization. 

·        
Negative Correlation is observed between
Exchange rate and Inflation rate (-0.431).

The correlation value is 0.028 which is
less than 0.05, hence H1 is accepted. Therefore, there is a significant
relationship between Exchange rate and Inflation rate.

·        
Negative Correlation was observed between
Exchange rate and Interest Rate (-0.807).
The correlation value is 0.000 which is less than 0.05, hence H1 is
accepted. Therefore, there is a significant relationship between Exchange rate
and Interest rate

·        
Positive Correlation is observed between
Exchange rate and External Debt (0.792). The correlation value is 0.000 which
is less than 0.05, hence H1 is accepted. Therefore, there is a significant
relationship between Exchange rate and External Debt

·        
Positive Correlation is observed between
Exchange rate and GDP (0.143). The correlation value is 0.026 which is less
than 0.05, hence H1 is accepted. Therefore, there is a significant relationship
between Exchange rate and GDP

·        
Positive Correlation is observed between
Exchange rate and FDI. The
correlation value is 0.000 which is less than 0.05, hence H1 is accepted. Therefore, there is a significant
relationship between Exchange rate and FDI

·        
The average exchange rate shows the
positive growth during the study period. This has been due to the surplus
Balance of Payment in India.

·        
 In
1990-1991 has the lowest rate of exchange Rs. 22.3

·        
The average inflation rate shows the
fluctuating trend during the study period. The rate of inflation 13.9 per cent
in 1997-1998, when compare with 3.7 percent 2000-2001. It was due to the
decreasing trend of GDP growth in India.

·        
The average interest rate shows the
fluctuating trend during the study period. It was due to maintaining
unfavorable lending of high loan to the industry and individual and less
maintenance of cash reserve ratio (CRR).

·        
The average external debt shows the
increasing trend during the study period.

·        
The average GDP growth rate shows the
fluctuating trend during the study period. The highest GDP growth stands for
9.2 per cent in 2006-2007.

·        
It is found that the India has been
adopting traditional market system and un modernization infrastructure
facilities when compared with other developing countries.

·        
The average rate of FDI is fluctuating
trend during the study period. 

 

 

 

 

 

 

 

 

 

 

5.2
CONCLUSION

 

This
research work helps to know the empirical relationship between the various
macroeconomic variables and the analysis of foreign investment to know the
current scenario and the depreciation of the currency against the value in
dollars in India. The period after the liberalization of the exchange rate of
the Indian currency is not satisfactory. However, foreign investment in the
Indian capital market shows a decreasing trend during the study period. In the
same way, the analysis reveals that the exchange rate in the Indian currency
was depreciating in the post-liberalization period and also its impact on the
Indian economy. The correlation analysis of various macro-economic factors with
the exchange rate shows that there is a positive correlation between External
debt, FDI and GDP with Exchange rate. Negative correlation was observed between
Interest rate and Inflation rate with Exchange rate. It is found that the India
has been adopting traditional market system and un modernization infrastructure
facilities when compared with other developing countries. The depreciation of
the currency is extremely worrisome because of the devastating impact it will
have on India’s economic fundamentals, which have been pushed to the edge by
global factors. The average exchange rate shows the positive growth during the
study period. This has been due to the surplus Balance of Payment in India.

 

 

 

 

 

 

 

 

 

5.3 SUGGESTIONS


The government should take some measures to attract FDI and create a healthy
environment for economic growth in order to loosen the rules for portfolio
investment in the Indian market, which indicates its desire to maintain
external inflows.


There should be a prohibition on banks adopting a proprietary position on
future currency or foreign exchange options.


The key to addressing the problem lies in attracting sufficient foreign flows
and the best way to do this is to make India an attractive destination with a
long-term variety.


The liberalization of FDI ceilings is another way of dealing with this situation,
minimizing procedural problems and creating the necessary infrastructure to
facilitate business.


More and more plans for the issuance of sovereign bonds should be launched. It
will raise the position of the rupee in the foreign market.


Key policy reforms such as the progressive implementation of the Goods and
Services Tax (GST), the Direct Tax Code (DTC), FDI in aviation and retail
trade, the Companies Act and the lack of control of diesel should start
adequately.


Policies must be announced by the government to point to a band for rupee
fluctuations.


The government should take measures to boost the intensive export sectors and
also try to develop the import substitution industry that will help India to
become less dependent on imports.


More export incentives must be provided to boost export trade in the country.


Another thing to control the depreciation of the currency is to formulate
policies and restrictions on the importation of gold to reduce domestic demand
for gold.


RBI should sell foreign exchange reserves and buy rupees in immediate stocks to
stop the further decline in the value of the rupees.

 

 


RBI should increase interest rates to reduce the supply of money in the
economy. They should attract more foreign institutional investors to the
country.


CAD is an important reason for the current scenario. So, the main solution to
address the current problem is to reduce CAD by reducing oil and gold imports

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.4
POLICY IMPLICATIONS & SCOPE FOR FURTHER STUDIES

 

 In post-liberalization period of Indian
currency exchange value growth is very low when comparing with dollar values.
It indicates that the import is over the export, high inflation and
multinational companies’ dominations. So, in order to increase the appreciation
of Indian currency value, Central Government must control deficit in order to
raise import taxes, restrict and regulate exports and imports.

 Foreign investment in Indian capital market
shows a fluctuating trend. So, in order to increase the foreign investment, the
government needs to control external foreign debt, GDP growth and raise the cap
on foreign investment, remove traditional market conditions. Macro- Economic
factors like interest rate is highly related with depreciation or appreciation
of Indian currency against the dollar value. So, the Central Government must
increase cash reserve ratio (CRR) along with interest rate.