The value of the Indian currency is almost in freefall. It has reached the mark of Rupees 57.15 per U.S dollar on Friday i.e. 22nd of June. The question that, what is it meant by the decline or the depreciation of the Rupee and how does it affect us in our day to day life arises automatically in our minds. The answer is simple. Rupee too behaves like any other commodity, when it comes to the issue of its value. Its value depends upon the fundamental principle of the market economy i.e. Demand and the Supply. Thus, if there is more demand for the Rupee or else if more people want to possess it or buy it-its value increases. Where as if more people want to get rid of it or sell it; its value does come down. The demand for the Rupee is declining now in markets. That is why it is losing its value and is depreciating. The FII’s, which had invested in the Indian equity market, in the good times, are disinvesting or selling away their shares in the Indian market now. In this process, they do sell the Rupees and in return convert them into dollars; so that they could reinvest the same in the global or the U.S markets. It means that the demand for the Rupee is declining as more and more investors do sell it away and buy dollars. The other reason for the declining value of the Rupee is the current account deficit of our country or else the Trade deficit. Here in this, our exports decline and our imports do raise. This leads to the greater out flow of the dollars for our imports; compared to the inflow of the dollars, from our exports. This raises the demand for the dollars from our importers, in order they could keep on importing from abroad. In turn the inflow of the dollars from our exporters does not keep pace with this outflow due to more imports. Thus it creates more demand for the dollars and more conversion of the Rupees into the dollars, in order to pay in the international markets. So, here too the demand for the Rupee is decreasing, as it is being sold away more than it is being bought.  The above two reasons are the main cause of the declining value of the Rupee now. And these two things are happening because of both the International and the internal reasons. The International reason is the decline in our exports, due to the European Union (E.U) crisis. The countries of the E.U, could not import as much as they did so far, because of the economic problems they are into, of late. And the reason for the FII’s selling away their stake in our markets is that, all the fundamentals of our countries are taking a nosedive since the last months of the Year 2011.For example, the GDP for the January- March quarter of the Financial year 2011-2012 has collapsed to the level of 5.3%.The other reason is the unabated high inflation, in the country. This is eroding the value of our currency i.e. the Rupee, by decreasing its purchasing power. So the FII’s are worried that they may lose the value of their investment, if they keep invested in our market. And so are the reasons like the falling levels of the industrial production and the declining consumer confidence, which too are contributing to the countries economic plight. These are the main reasons that do discourage the FII flow and FDI flow too in to our country. Hope you got an outline sketch of the reasons for the depreciation of the value of the Rupee…