When citizens convert domestic currency to foreign currency for activities like foreign travel or gold purchases, increased demand for foreign currency causes the domestic currency to weaken in value, as currency exchange rates are determined by market supply and demand forces.
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What is the Logic behind - Hon'ble PM Modi APPEALS ? #pmmodi #bjp #rahulgandhi #upsc #iasAjouté :
Hello everyone, as you all know that Prime Minister Modi ji has appealed to all the Indians to follow these measures in order to make our economy sustainable, in order to make our rupee sustainable, and also to fight the global oil crisis. In all these appeals, two appeals are related to to protect the rupee from even falling or weakening. Why? Because if you go to the foreign travel, what will happen?
Obviously, you have to shell out in the foreign currency. Let us suppose you're going to UK, then you have to use euro there in order to buy something, right? So, that's why what you do, you take INR rupees, 1 lakh rupees, go to the RBI, convert into euro, and go to what? UK, and spend there. So, if like we go again and again, a lot of people are going like that, what will happen? Our foreign reserves will decrease. That is the one point another And mind you, currency exchanges are depends upon the market forces, nothing but supply and demand. The more you demand, the prices will increase more.
So, what we do is we demand more and more euro. So, what euro will do, what the UK will do is they increase the prices of euro per unit of INR, whatever we are giving. So, they will say that, "No, if in 60 rupees, 1 euro we will not give, we'll give 100 rupees, 1 euro."
Like that. Because we are demanding more and more, they got the opportunity to increase the euro price. That is one.
That's why we have to stop for foreign travel. Another one is don't buy the gold. Why? Because we do not have KGF kind of kind of gold mines at this point of time. So, we import a lot of gold from other countries. In the same way again, when we are importing from other countries, we have to go to the RBI, give our INR, and take the gold from that respective countries in exchange of what? Their currencies only. Again, we are demanding foreign currency. With that, what is happening? The rupee value is decreasing. These are two important measures. Okay, in order to protect the weakening of rupee. I hope this is all clear to you. If you're having any doubts, please write in the comment section. Take care.
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