The money which can be freely exchanged into gold or other countries’ currency and also in the realm of international trade there are lots of demand for it – the money – is called ‘strong money’; this can happen when international demand for goods or services of a specific country is highly increasing, or the time that there is a deficit in its trade balance, i.e. the U.S. after the WWII.

In a very simple definition the more the amount of inflation increases in a country, the more its currency depreciates in comparison to the past. So, if we be able increase the strength of a money or keep it at the same level of power, we would be able to tame the inflation. Generally, strong Rupee, or any other strong currency, indicates that that money is powerful in two ways:

1.       The ability and stability of that money in purchasing goods or services in specific periods of time

2.       The value of a money of a country comparing the money of another one, that is its value in comparison with the foreign exchange like dollar

Now, we focus on answering this question that how strong Rupee or any other strong money can tame the inflation. We may point into some essential factors;

1.       The value of the currency of a country is connected to its power in competing with other countries’ economy. To do so, having high efficiency in economy and producing goods in the country with lower prices comparing to other countries help the country’s economic superiority forward among other nations.

2.       An economy is considered powerful and can compete in international market that producing goods and services within the country cause no lacks in supply, and it causes a long-run price fixation in economy. And this price fixation means taming inflation in its lowest form.

3.       One of the reasons of inflation is the increase in the amount of cash among people in the society. If we apply some policies of economic developments and increase GNP to keep the money strong we won’t need to print banknotes without plans, and as a result we would be able tame the money to some extent.

4.       If all the above can come true to make a strong money,in the international market, we would be able to import the foreign goods with a lower price, and also compensate for the domestic needs of some particular goods and services. This way, we can stop those particular goods price-increasing, and this can help tame the inflation as well.

5.       If the value of a money is higher in comparison with other countries’ money value, this means that the value of our money in export is higher than its value in import which means a price stability in the domestic market, hence, another style in taming the inflation.

In general, the increase in the strength on Rupee has both positive and negative effects. A strong money causes a huge sum of investment at the beginning, and that causes a routine increasing in economic development. This economic development at first causes inflation, but later causes price stability decreases inflation.

In the name of God

How strong rupee can tame inflation?

Inflation in India and the value of Rupee have direct relationship together, and the value of Rupee affect on inflation in four main factors,

1-the strong Rupee references to strong economy in India and strong economy means the produce of goods and services is very efficiency and the amount of supply exceeds of demand, then the strong of rupee can tame inflation easily.

2- In international trade the value of Rupee in comparison to foreign money means the cost of production decreases because we import raw material and other essential substances for the production in a lower prices and this trade means lower inflation.

3-Deficit imbalance in the international trade or domestic budget lead to government has to borrow very much loan from the central bank or international organizations and this process lead to decrease the value of Rupee , unlike this state if we have surplus in international trade or domestic budget the value of Rupee increase and affect to control the inflation.

4- the amount of cash in the country without the efficiency of production lead to surplus of demand then if we manage the amount of cash and strength the money

We decrease the surplus of demand and finally we can tame the inflation.

Gholam Reza badrimanesh – student of Indian studies.