Forex Market in India - Foreign Exchange Markets in India

Since the onset of liberalization, foreign exchange markets have witnessed explosive growth in trading volume. The importance of the exchange rate to the Indian economy has also been greater than ever before. While the government has explicitly adopted a flexible exchange rate regime, in practice the rupee is one of most efficient trackers of the US dollar. Apprehensions of capital flow-driven currency crisis have held India back from capital account convertibility though the debate continues. The rupee’s deviations from Covered Interest Parity (with respect to the dollar) exhibit relatively long-lived swings. An inevitable side-effect of the Indian exchange rate policy has been the ballooning of foreign exchange reserves to well over a hundred billion dollars. In an unprecedented move, the government is considering using part of these reserves to finance infrastructure investments in the country

Keywords: Foreign exchange in India, India, Forex Market in India