Since 2011, the Rupee has depreciated 33% against the US Dollar, moving from a rate of Rs. 44.70 per US dollar at the end of December 2010 to Rs.66.80 per US dollar in December 2015.Which of the following may increase because of this depreciation?

  1. Current Account Deficit
  2. Inflation in India
  3. Inward Remittance

Select the correct option from codes given below:

Answer: [B] Only 2 & 3

Depreciation of Indian rupee against US dollar will lead to more export and less import; this in turn will lead to positive effect on current account of India with large foreign capital inflow. Thus Current Account deficit would go down. {Statement 1 is incorrect}
Depreciation of rupee will promote exports and will retard imports; this will bring deficit of goods within the country and lead a situation of too much money chasing few goods and hence will increase inflation rate within the country. {Statement 2 is correct}
Depreciation of rupee will make expatriates to send more and more foreign currency to India to get better returns. So this will also have a favourable impact on current account. {Statement 3 is correct}

This question is a part of GKToday's Integrated IAS General Studies Module