What happens to Indian exports when Indian rupee is devalued?

Explanation

The correct answer is Exports become cheaper. Exports become cheaper when the Indian rupee is devalued. Important Points Devaluation occurs when a country intentionally reduces the value of its currency relative to one or more foreign countries . When the country follows a fixed exchange rate regime the government constantly has to revalue and devalue the currency to maintain the pegged exchange rate. When there is upwards market pressure on the currency to appreciate, the central bank will artificially devalue the currency by buying up foreign reserves. Devaluation occurs when a government wishes to increase its balance of trade by decreasing the relative value of its currency. Since the value of Indian currency decreases, it makes Indian goods cheaper which in turn encourages foreign countries to import more goods from India. The foreign countries find it extremely profitable to import goods from India when the INR is devalued, hence, exports become cheaper too. In the short term, a devaluation tends to cause inflation, higher growth and increased demand for exports.