What is Devaluation of Currency and Why it is Done?

When the external value of home currency is reduced it is called devaluation.  Its main aim is to correct the deficit in the balance of payment. While depreciation and appreciation takes place automatically according to the movement in the demand and supply of currencies in the market, devaluation and revaluation are done voluntarily by a monetary authority or by
government. Basically Devaluation is done to increase export of the country.


 Take an example-

Lets say Price of rice in India per kg is ₹25 and there is a foreigner who wants to purchase or say import 2 kgs of rice, so with USD 1 that foreigner can import 2 kg of rice if exchange rate is ₹ 50 = USD 1

If devaluation is done i.e. ₹75= USD 1, that foreigner can import 3 kg of rice. So he can now import more rice at the same price, thus export increases in India and the profit of exporter increases as well.