Differentiate between devaluation and depreciation.

Devaluation

Depreciation

Devaluation refers to the fall in the value of domestic currency in relation to a foreign currency as planned by the government.

In devaluation it is government which reduces the value of domestic currency in terms of the foreign currency.

Depreciation is the fall in the value of domestic currency in relation to a foreign currency, it is the free play of the forces of demand and supply of foreign exchange in foreign exchange market the government has no role in it.

Devaluation is a desired fall in the value of a rupee.

Depreciation may cause undesired fall.

The objective of devaluation is to promote export and to curb import.

Depreciation may result in current account deficit and fiscal deficit.