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To show impact of money supply and inflation on exchange rate of ₹ v/s $ and analyse it for the period 1980 to 1990, 1991 to 2000 and 2001 to 2012; a ppt by a group of students of Era Business Achool, New Delhi
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Era Business School AJ/ Ajay K Raina; PGDM 12’14
Era Business School AJ/ Ajay K Raina; PGDM 12’14
Era Business School AJ/ Ajay K Raina; PGDM 12’14
OBJECTIVE To show impact of money supply and inflation on exchange rate of ₹ v/s $ and analyse it for the period 1980 to 1990, 1991 to 2000 and 2001 to 2012
Group MembersJay Krishna Deepika HandooCol Ajay K Raina, SM AK MishraSaurabh Daravaria Anant Maheshwari
Era Business School AJ/ Ajay K Raina; PGDM 12’14
A SIMPLISTIC REPRODUCTION…….What lies ahead!
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
2012
-60.00
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
100.00
120.00
Era Business School AJ/ Ajay K Raina; PGDM 12’14
Broad Parameters• Data, as used in the presentation, are in terms of
percentage (YoY) increase.• The following values have been used:-– ER – Market price, averaged to calendar year.– Inflation – GDP deflator.– Money Supply – Narrow Money only.
Era Business School AJ/ Ajay K Raina; PGDM 12’14
COMPARATIVE INFLATIONARY TRENDS1980- 1990
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 19900.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
GDPd India%GDPd US%
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 1990
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 19900.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
GDPd India%GDPd US%ER% incr
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 1990
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 19900.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
GDPd India%GDPd US%ER% incrM1 growth % ₹M1 growth% $
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 1990
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
-3000.00
-2500.00
-2000.00
-1500.00
-1000.00
-500.00
0.00
500.00
1000.00
BOP Million $
BOP Million $
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 1990
Overall Equations Year Inflation %
IndiaInflation % USA
M1 India Bn ₹
M1 USA Bn $
ER 1$=….₹
BOP Mn $
1980 11.51 9.12 200 465 7.88 -1140
1990 10.67 3.79 810.10 907 17.50 -2492
Era Business School AJ/ Ajay K Raina; PGDM 12’14
COMPARATIVE INFLATIONARY TRENDS1991- 2000
1991 1992 1993 1994 1995 1996 1997 1998 1999 20000.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
GDPd India%GDPd US%
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1991- 2000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
GDPd India%GDPd US%ER% incr
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1991- 2000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
GDPd India%GDPd US%ER% incrM1 growth% $M1 growth % ₹
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1991- 2000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-2000.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
BOP Million $
BOP Million $
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1991- 2000
Overall Equations Year Inflation %
IndiaInflation % USA
M1 India Bn ₹
M1 USA Bn $
ER 1$=….₹
BOP Mn $
1991 13.75 3.40 929 985.80 22.69 2599
2000 3.65 2.16 2678.44 1211.51 41.27 4222
Era Business School AJ/ Ajay K Raina; PGDM 12’14
COMPARATIVE INFLATIONARY TRENDS2001- 2012
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
GDPd India%GDPd US%
Era Business School AJ/ Ajay K Raina; PGDM 12’14
2001- 2012
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-10.00
-5.00
0.00
5.00
10.00
15.00
GDPd India%GDPd US%ER% incr
Era Business School AJ/ Ajay K Raina; PGDM 12’14
2001- 2012
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
GDPd India%GDPd US%ER% incrM1 growth% $M1 growth % ₹
Era Business School AJ/ Ajay K Raina; PGDM 12’14
2001- 2012
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-40000.00
-20000.00
0.00
20000.00
40000.00
60000.00
80000.00
100000.00
BOP Million $
BOP Million $
Era Business School AJ/ Ajay K Raina; PGDM 12’14
2001- 2012
Overall Equations Year Inflation %
IndiaInflation % USA
M1 India Bn ₹
M1 USA Bn $
ER 1$=….₹
BOP Mn $
2001 3.18 2.27 3794.33 1213.52 7.88 11757
2011/12
7.75 1.72 17342.34 2323.95 17.50 -12832
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 2012
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20120.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
GDPd India%GDPd US%
INFLATION
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 2012 INFLATION+ ER
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
2012
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
GDPd India% GDPd US%
ER% incr
Era Business School AJ/ Ajay K Raina; PGDM 12’14
1980- 2012 INFLATION+ ER+ MS
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
ER% incrGDPd India%GDPd US%M1 growth% $M1 growth % ₹
Era Business School AJ/ Ajay K Raina; PGDM 12’14
And once we add Forex and Foreign Debts (all in % YoY).…..
This is where we had started from
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
2012
-60.00
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
100.00
120.00
ER% incrGDPd India%GDPd US%M1 growth% $M1 growth % ₹Foreign Debt %Forex%
Era Business School AJ/ Ajay K Raina; PGDM 12’14
Methodology• Guidance : Our gratitude to Prof JS Dahiya
• Secondary research based on the following websites:-– http://www.imf.org IMF – http://dbie.rbi.org.in Reserve Bank of India– http://commerce.nic.in/ Ministry of Commerce– http://databank.worldbank.org World Bank– http://www.inflation.eu EU– http://mospi.nic.inMinistry of Stat and Pgme Implementation– www.IndianJournals.com Publisher– http://labourbureau.nic.in/indnum.htm Labour Bureau– http://oldfraser.lexi.net/publications/ Publisher– http://fxtop.com/en/currency-converter-past.php Historical Currency
rates.– http://www.federalreserveonline.org/ Fed Res
Era Business School AJ/ Ajay K Raina; PGDM 12’14
Comparison with Article….• The article, “Solving the Riddle” (Cato Institute;
published in Business India) simplistically explains the change in currency value.
• The main factors that influence ER, as per the article, are as under:-– Inflationary Pressure;– Money Supply; and– BoP/ Forex.
• Our research has highlighted the above linkages too and yet do believe that there are certain hidden forces that have a role, big or small, to play in such fluctuations.
Era Business School AJ/ Ajay K Raina; PGDM 12’14
• Differential in interest rates, foreign debts and perception about country’s political and economic performance are some of the key factors that have a role to play. These being out of the purview of today’s presentation, same have been left out.
THANK YOU!
……Comparison with Article