The Dutch Disease

In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector and a decline in other sectors. The mechanism is that as revenues increase in the growing sector, the given nation's currency becomes stronger compared to currencies of other nations. This results in the nation's other exports becoming more expensive for other countries to buy, and imports becoming cheaper, making those sectors less competitive.

The Dutch Disease is a recent term a came across while scrolling through the internet. It is a situation where when one good is substituted for the other,resulting in reduced value of the former. The same principle can be true if the  two goods are produced by different countries it will result in a reduced value of the country whose goods are no longer consumed. 

In a recent example, The fall of Indian rupee is a case of The Dutch Disease . The fall of rupee actually provides a platform for India to export more and more goods than ever before.The elasticity of Indian exports to rupee is high, as most of the exported goods can be substituted by exports from other countries. This explains why India's exports have underperformed despite strong global growth over the last couple of years.