Reasons for DOLLAR becomes Stronger!!!

This article is the continuation  of DOLLAR vs RUPEE, in this I would like go more dipper, I mean  facts, elements and reasons behind above reason. But dnt worry i am not giving any theoretical lectures, try to explain in simple way. In last article( click here to view part 1) we knew that how does dollar become powerful. And also knew that how
dose USA set price as per their wishes and INDIA not able set even their own market price market price also.
 I think everyone need to know about this basics, so at least you will not skip the page of paper or any news related to this topic.

So in this we are going to  understand, what factors may directly affect.


1st (basics): Main fanda is the concept of "DEMAND and SUPPLY.
Lets understand with an example: 
            You want to import any US product,f or this you would need $. And currently you have Rupees (Rs). So, you go to INDIAN FOREIGN EXCHANGE MARKET to exchange Rupees into DOLLAR (Rs in to $). But you are not alone! there are many people are doing this. Given INDIA's import and export, there are more people demanding DOLLAR for Rupees ($ for Rs)than vice versa. Refer to this graph! so the value of $ in terms of Rs goes up! shows the relation between Demand(D), Supply(S) and Price(P). 

            This is the basic reason for Devaluation of RS..
            This is one of the law of Demand and Supply.

2nd(elements): Now i would like to mention few points and then describe these in terms of Demand and Supply of DOLLAR($) and RUPEE.
Dont feel panic, Dont worry i am not giving any theoretical knowledge.
   
     A)Primary:
                i)Trade Deficit & Current Account Deficit: Trade deficit is the excess import against export. Let assume, INDIA import from USA $100, and export to USA $20 so, deficit is (100-20)=$80.
In 2012 India's actual trade deficit was  $190 billion.

The vital reason for such a large Trade Deficit in India is, "CRUDE OIL and GOLD IMPORT".
we import more than 75% above two product.             

                  ii) Irregular, Low Capital Inflows: In GOOGLE there is lots of defination about capital inflow.
      In simple way , foreigner, NRI, IT sector etc types of persons and industries do generate and send  foreign money, its call capital inflow. 
     INDIA has become an attractive destination for investment like stocks, bonds, real states, so that foreigner are also interested to invest.  In 2011-12, India received foreign direct investment (FII) of more than $30bn, in addition to a net inflow of $18bn from foreign institutional investors in stocks and bonds.
   Now problem is, due to different economic reason, retrospective taxes, and different policy forced to INDIAN govt, Indian economy forcing to investor either  postponed their investment decision or take money out of INDIAN market.
 The capital inflow is not enough to make up for the capital deficit.

                   iii) High Inflation:  its one of the major reason.
In this scenario, most foreigners as well as INDIANs tend to take money abroad, or keep it away from INDIA.

     For example; suppose you have Rs 10, and a chocolate costs Rs 1. So you can buy 10 pc out of these. Now for inflation costs of this chocolate increase to Rs 2 each, so you can buy 5 pc out of Rs 10. Thus the value of Rs 100 has decreased! 
So you would prefer keeping Rs 10 abroad and bring it in when you know that the value of Rs 10 would be more

As people want to keep money abroad due to high inflation in INDIA, this also creates more demand than supply.

      B)Secondary:
                   1) Devaluation pressure
                   2) Market Manipulation
                   3) Corruption and Instability Politics 
                   4) Mounting demanding Dollar 
                   5) Rupees Speculation
                   6) Oil price 
                   7) Outflow of Foreign capital
                   8)Lower inflow of Foreign capital
                   9) High govt deficit