Price of a currency in respect to other country’s currency is called as exchange rate. The price of a currency moves upward or downward depending upon the demand and supply forces. If a demand for a currency rises, its price rises and it is called as appreciation, on the contrary, if the demand of other country’s currency increases, the home currency’s price falls and it is called as depreciation. Indian rupee has depreciated more than 26 per cent since 2011. The persistent decline in rupee is a cause of concern. Depreciation leads to imports becoming costlier which is a worry for India as it meets most of its oil demand via imports. Apart from oil, prices of other imported commodities like metals, gold etc will also rise pushing overall inflation higher. Even if prices of global oil and commodities decline, the Indian consumers might not benefit as depreciation will negate the impact. The depreciating rupee will add further pressure on the overall domestic inflation and since India is structurally an import intensive country, as reflected in the high and persistent current account deficits month after month, the domestic costs will rise on account of rupee depreciation. Exchange rate risk also drives away foreign investors which in turn depreciates the local currency. Indian Rupee is currently caught in this vicious cycle; it will have to find a stable level to regain investors’ confidence. The depreciating rupee has serious effects on the external debt figures of the nation. Owing to uncertainty prevailing in Europe and slump in international market, investors prefer to stay away from risky investments. This has significantly affected the portfolio investment in India. Consequently, flow of dollars start decreasing with respect to demand, and thus resulting in the fall of Rupee. Credit rating agencies also downgrade India’s rating. Any outward