India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

Question

Quizplus · Accepted Answer

A continuous deficit in the balance of payments typically leads to a depreciation of the domestic currency because it indicates that the country is spending more on foreign trade than it is earning, and borrowing capital from foreign sources to make up the deficit, increasing the supply of the domestic currency relative to foreign currencies.

India Is Facing Continuous Deficit in Its Balance of Payments