8Th November 2016 the day that can never be forgotten by any Indian. Prime Minister Narendra Modi took a bold step towards wiping out black money from India. The reason specified by him for this drastic step was that black money was used to fund terrorism in India. When this initiative was announced to the public, first and foremost concern that Indians living abroad was will rupee value increase.
As per details from XE.com the rupee value (in comparison to USD) fell down to 66.24 from 66.34. More importantly the main questions comes to one’s mind is, will the rupee value change based on the inflow of black money into the system. Typically the foreign currency value depends on the demand of it. India imports crude oil of 18.81 million tons per month (this is the stat of August 2016). To buy this India needs to pay in the universal currency i.e. USD. Apart from oil there are other imports for which India needs USD. These imports cause the demand for USD. Similarly when India exports goods and services it gets paid in USD. When imports exceed exports India needs to buy USD and in turn USD value increases. Below is the chart showing imports vs exports vs rupee. Read more on Narendra Modi Initiatives.
Since black money will flow into the banking system India can now look at options to finance companies outside the country. The only problem is that the interest value for Indian financial institutions are high (at least 10%) when compared to foreign institutes. India’s total debt is $480,000 Million USD. This can be partly cleared with the tax income from all the black money that will be converted into white money. This way India’s demand to buy USD will decrease therefore rupee value will increase.
Narendra Modi’s make in India initiative is purely designed to reduce imports for increasing value of INR. Modi during his campaign has pledged to improve INR value. Initiatives like Make in India and full stop to black money are proving his promises to this nation. Read Business News.