Information About the Economy of India and the Indian Rupee in Forex Trading
The currency of India is known as the Rupee and has a Forex code of INR. Currently, there are 24 trillion Rupees in circulation and it is the 20th most traded currency in the world, with around US$53 billion worth of Rupees traded each day on the currency markets. The Reserve Bank of India is responsible for regulating the currency. The Reserve Bank of India is the nation’s central bank, responsible for determining the country’s monetary policy. The bank’s governor sets the short term interest rates (also called the Repo rate) after taking advice from the monetary policy technical advisory committee. Interest rate decisions are announced six times a year at approximately 60 day intervals. The Reserve Bank of India had a policy objective to maintain the stability of prices while paying attention to the impact the rate will have on the growth of the economy. The annual target is set based on the nation’s combined consumer price index. The Indian government maintains a currency reserve pool agreement of US$100 billion with the BRICS group of nations members i.e. South Africa, China, Brazil and Russia. Member states are able to provide financial support for the others should one member suffer problems with Dollar liquidity. The country has also signed up to a currency swap agreement to the value of US$1.5 billion with Sri Lanka to help support liquidity in that country.
A Quick History of the Indian Rupee
The first mention of an Indian currency is from a 6th century BC text referring to coins punch-marked with symbols called rupa. There are also mentions in the 4th century BC to silver coins featuring symbols called rupyarupa. The Islamic ruler Sultan Sher Shah Suri issued a coin in 1540 made from silver and with a standard weight. This was given the name Rupiya and remained in use even in the time of the British occupation during the 18th century. It was during the 1700s that the Bengal Bank and Bank of Hindustan were established and began issuing paper currency called Rupees. The gold standard was adopted in 1898 and the Rupee was pegged to the British Pound Sterling. The Paper Currency Act was passed in 1861 giving the government the monopoly on issuing the Rupee across the entire country. The Reserve Bank of India was established in 1935 as the country’s central bank with its location in Calcutta. It was given the responsibility of issuing the nation’s bank notes in 1938. When India gained its independence from Britain in 1949, the Rupee began to be issued in Hindi and using an image of Mahatma Gandhi. In 1957, sub-units of the currency were also issued called Naya Paisa, with 100 of them making up one Rupee.
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India’s National Economy
India has the 4th biggest economy in the world according to its GDP. It also has one of the world’s largest populations with over 1 billion citizens. India has an emerging open market economy, and the government are trying to liberalise their policies, placing less control on foreign trade, industry regulation and investment. The country’s main industries include chemicals, textiles, food processing, transportation equipment, steel, cement, petroleum, mining, machinery, pharmaceuticals and software. India’s economy is diversified with its basis on both industry and agriculture on both a small and large scale. India’s farming industry has grown by over 5% per year and around 50% of the country’s population is employed by the agriculture sector. India’s service sector is also growing which benefits the nation’s economy. Information technology services are growing as are the software industry and business outsourcing services. The service industry is therefore currently responsible for around 60% of the country’s economic growth. In recent years however growth has started to weaken due to the slowdown in the global economy and uncertainties exhibited by investors over India’s current account and fiscal deficits. There are also challenges faced by the country due to its overstressed education system, migration from the countryside to the cities, deficient infrastructures and poor power generation network. The outlook for growth is positive however thanks to the young population, strong investment and savings rates and an increased amount of integration into the world economy. India’s main trading partners include the United Arab Emirates, America, China, Hong Kong, Saudi Arabia, the UK, Singapore, Vietnam and Sri Lanka.