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Indian Rupee Free Fall

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Indian Rupee Free Fall
Six reasons why India's rupee is in freefall
Since July last year, the Indian rupee has fallen by more than 27% against the US dollar, one of the biggest declines among Asian currencies.
Here are six main reasons for the steady slump in the value of India's currency:
UGE TRADE DEFICIT
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US Dollar v Indian Rupee
Last Updated at 19 Jul 2013, 22:06 GMT $1 buys | change | % | 59.3950 | 0.00 | 0.00 |
Since India imports more goods (in value terms) than it exports, it results in a huge imbalance in trade, or what is called a trade deficit.
In the financial year ending March 2012, the deficit zoomed to $185bn (£118bn) compared with the original estimate of $160bn.
India's Commerce Secretary Rahul Khullar has predicted that the trade deficit may be slightly lower in 2012-13, due to falling global crude prices and recent government curbs on gold imports.
A $1 per barrel decrease in crude price reduces the country's deficit by $900m at existing import volumes.
On the flip side, India's export performance may prove to be a dampener this year.
Mr Khullar has added that India will be lucky if exports, which grew 21% in 2011-12, manage to witness a growth rate of 10-15% in 2012-13, due to the crisis in Europe and slow economic recovery in the US.
LOWER CAPITAL INFLOWS
Although India has become an attractive destination which can woo foreign capital as well as money from non-resident citizens, it is not enough to make up for the trade deficit.
In 2011-12, India received foreign direct investment of more than $30bn, in addition to a net inflow of $18bn from foreign institutional investors in stocks and bonds.
But uncertainty about India's commitment to economic reforms, retrospective taxes, and policy paralysis within the government have forced foreigners to either postpone their investment decisions, or take money out of Indian stock markets.
HIGH CURRENT ACCOUNT DEFICIT
The country's current account deficit - a

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