A. Have other currencies in world also suffered in same way with respect to Dollar or only Rupee has been affected so adversely?
Other currencies in Asia have also been affected as a result of a slowing global economy.
B. What are the reasons for such devaluation? How does it affect our economy?
The reasons are a little complex and there is more than what meets the eye. In short, it would be a case of a very strong USD (US dollar) that is making the INR (Indian rupee) look weak. This is supported by the fact that the economic situation within the country is comparatively better than the global economic situation.
If we see the INR vs the USD, it was Rs 64.29 this day last year, in comparison it is Rs71.87 this year.
The important reasons are
1. The growing demand for the USD by the international market and trading countries.
2. The Chinese yuan was also weaker ( except the last two days) and the US Chinese trade war has made USD stronger and much sought after commodity.
3. Rasing crude oil prices, the major culprit. Last year September it was 53-54 USD/barrel and this September it is 77-78 USD/barrel. This financial year alone, India is grappling with a RS 53,000 crore fuel subsidy bill.
Nomura, a global financial services player has stated that for every 10 USD raise in the crude oil/barrel, the impact on the fiscal balance of India is by 0.1% and the current account balance by 0.4% GDP and increases inflation by 0.6-0.7 points.
4.Due to the adverse impact on the Indian bond prices, the US trade wars, Foreign investors have pulled out Rs 46,000 crores so far this year. This has an negative impact on the strength of INR.
5.Strong growth of US GDP. In the months of Apr-June, the US GDP has doubled from 2.2% to 4.1% which is another factor the impacts the strength of the USD.
C. What corrective actions can be taken by the Govt to tackle this problem?
The positive news is India (along with China, Brazil,Russia) is better placed to handle the growing value of the USD.
The RBI will have to raise interest rates, attract foreign investments, restrict the net outflow of FDI each quarter etc. At times of crisis, the RBI can sell it's dollar reserve and or borrow from NRIs. The extent to which the RBI acts would be guided by the global cues and the global economy. The weaker rupee helps in exports and to compete with the very cheap Chinese goods. India should focus on keeping the lid on the inflation rate and the domestic economy until this phase passes off.