When we talk about ‘Currency war’ in the world today, it seems to be a risk for all three major international currencies. Their currencies are not one hundred percent assured in all aspects and their political systems too are fragile; the current Japanese politics have shown that.
There is no doubt that the Euro zone is edging up towards a conflagration. Greece is not able to pay its debt and is in a situation where it is in a precarious situation.
You may have noticed that the global economy has gone into a recession, which was predicted by some economists, but as you may have observed, many people are not exactly feeling the pinch yet. At this time the western world is in turmoil. And the Asian region is in the middle of a turmoil.
When it comes to India, the Indian Rupee is facing a huge trade deficit against China. The Indian economy depends on China for a lot of its exports and when the Chinese economy slows down, the Indian economy also turns down.
Also there is a big question mark on how much exports are going to come in to the Indian economy, because if the economy falls off the cliff, it will mean a big hit to the economic growth. If the country is going to suffer a heavy hit in a large scale, then it can easily fall into the negative side of the spectrum.
The Indian Rupee and the Chinese Yuan have been in a trading war for a long time. There have been several incidents of rupee depreciation against the Chinese Yuan and there have been several instances of currency wars.
China’s move to devalue their currency has caused a strong reaction from the Indian Government. The Indian Government is having second thoughts about its reliance on China for its imports.
Also when the Indian Rupee starts to depreciate against the Chinese Yuan, India has to decide whether it wants to import Chinese goods or whether it wants to continue with the imports of Indian goods. This is a big dilemma that India has to face and it is going to play a role in determining how the Indian economy is going to grow over the next few years.
Both the Chinese and the Indian economies have been affected by this crisis. China is not going to recover and the Indian economy is in a phase where the recession will get worse.
The currency war between the Chinese and the Indian currencies has a large impact on how the global economy is going to grow in the next few years. As both countries struggle to find ways to solve their economic problems, the entire world will be affected, causing a domino effect across the globe.
There has been a debate on whether the Indian Rupee would be devalued further, the Chinese Yuan has been holding its ground, so if the rupee gets devalued, it is likely that the Chinese Yuan would fall as well. However, if the rupee stays the same, then this will be a positive for the Chinese economy.
With the current state of the Indian economy, it is unlikely that the Indian Rupee will fall any further. The Reserve Bank of India has stopped a further depreciation of the Indian Rupee, it seems that the situation will remain stable.