Impact of Pegging of Nepalese Currency with Indian Currency in Online Business


The pegging of the Nepalese currency has several advantages as well as disadvantage. Here the concise description of the impact of currency is analyzed on the basis of its impact on online business.

Countries have mainly three options for the exchange rate policy. First, is the dollarization it means the country can use the dollar this requires no monetary policy and central bank to control the currency.

Second is the Pegging it involves the fixing of currency with other currency of another country. This enables the country to produce the monetary policy to control mainly the inflation.  They can be further divided into two types fixed like that of Nepalese rupees and range pegging.

Third are the most widely using methods by the countries around the globe. This process is called the flotation, which the currency will be impacted by series of data like the unemployment, inflation, output, etc. This is the most commonly used practice around the globe.


The Nepali currency has 100 Poisa for Rupee 1. As an example, if you take $1 the 100 cents can be defined as 100 Poisa. There are no coins of Poisa available in Nepal. In the past, there use to be the Poisa coins. The Nepal Rastra Bank controls the Nepalese currency and produces the monetary policy each year. 

Nepal-India Pegged currency


Nepalese currency is pegged to the Indian currency in the year 1992 AD. Nepalese rupee is pegged to Indian at 1.6 Nepalese Rupees equivalent to 1 Indian Rupees.

Currency Pegging advantage and disadvantage

There are both the advantage and disadvantage of pegging of currency to another currency.

Advantage

The economic turmoil of Nepal has little or no effect on Exchange rate.


Pegging of Indian currency has enabled lucid business with the Indian counterpart.


During the several tumultuous political situations in Nepal, Rupee currency was prevented from depreciation due to the pegging.


Disadvantage


The chronic disadvantage of pegging of currency is that there is no control in the value of an own currency.


Banks that are denied by the Indian government does not work in Nepal and Bhutan.


Payoneer withdraws options to the local bank account is not available because of an unwillingness of Indian government.


Certain travel cards that work around the globe does not work in India, Nepal, and Bhutan.


Indian economic controls the Nepalese Rupees. Stronger the Indian rupee more will be the value of Nepalese rupee. For example, due to the weak Indian economy, the Value of USD and other currencies has risen considerably.


What if Nepalese rupee is dollarized?


Nepali currency can be dollarized instead of pegging with the Indian currency. There are several advantages and disadvantage of this. This is the process of using the dollar instead of Nepalese rupees. Dollarization eliminates the monetary policy of the country. This is widely accepted by country with a weak economy and economic listlessness.







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