Depreciation vs Devaluation of Currency
Depreciation and devaluation both describe a fall in a currency's value, but they occur under different exchange-rate regimes.
Depreciation and devaluation both describe a fall in a currency's value, but they occur under different exchange-rate regimes.
Depreciation
Depreciation is a decline in a currency's value driven by market forces under a floating exchange-rate system — for example, when the rupee weakens against the dollar due to demand and supply.
Devaluation
Devaluation is a deliberate reduction of a currency's official value by the government or central bank under a fixed exchange-rate system.
Why it matters for UPSC
The depreciation vs devaluation distinction (market-driven vs deliberate) is a commonly tested Economy concept.
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Practise PYQs →Frequently asked questions
What is currency depreciation?
A market-driven fall in a currency's value under a floating exchange-rate system.
How does devaluation differ from depreciation?
Devaluation is a deliberate official reduction of a currency's value under a fixed exchange-rate system, not a market outcome.