Economics of the Indian Rupee

The currency of India is the Indian Rupee. It was first introduced by Sher Shah Suri around the 16th century. Since then the Rupee has gained a wide global acceptance.

There was significant changes to its pegged value in the 20th century, with originally being pegged to the British pound in 1928, and then moving to the Dollar gold measurement in 1948. It wasn't until 1991 that the Rupee moved towards the most common form of currency valuation with the floating rate.

The Rupee known also as the INR was devalued twice on recommendations from the IMF to halt the ever expanding trade deficit that existed in India. Its thanks to this that has caused huge growth in the exporting business from India to the rest of the world, and has certainly contributed to India's rapid rise as an economic power.

Accordin to the United Nations Conference on Trade and Development report of 08/09 India has had the highest amount of growth with an increase of 85% year on year.

It has had foreign investment totaling more than $46 Billion, up from a previous year of $25 Billion. This is a great measurement of how foreign investment companies view the overall financial prospects of India. They were ranked 9th in the table for foreign investment popularity.

With India now using the standard exchange rate system, its become easier for the large business, and entrepreneurs to raise capital on the international market with Investors lending them money for business and civilian development projects, and receiving good returns. Thanks to the Indian Rupee being more accepted worldwide, we can now see an increase in large Indian multinational companies worldwide.

This again is helping more investors and business owners from outside of India to setup shop in India as it quickly catches up with the development standards of the already established western countries.

Another issue that needs to be urgently addressed is the fall in the book profits of the domestic firm having Transaction/Translation/Economic exposure. As the AS11 (accounting standards) require the firms' to make adjustment for the Mark-to-Market Gain/Loss in their balance sheet, any INR appreciation would have to be reported as FOREX losses thus reducing shareholder's wealth.

This issue may be addressed by encouraging the firms with Foreign loans to go for CIRS (Currency and Interest Rate Swaps) and greater hedging opportunities. Currently only $-Re, Pound-Re, Yen-Re and Euro-Re currency futures are available in the stock markets but as India's bilateral trade grows, she would need to introduce a whole new variety of Currency Futures if she needs to safeguard her economy against Exchange Rate volatility.

India has shown great resilience to the Financial and Economic crisis of 2008 but with changing times as it assumes greater responsibility on an International scale, she would need to ensure greater financial and economic stability of its domestic economy with the introduction of timely reforms and regulations as deliberated above.