Indian Rupee in the Foreign Exchange Market
The Indian rupee (INR) is considered to be an exotic currency in the Forex market. India is the world’s fourth largest economy.
Trade Surplus or a Trade Deficit
India runs a trade deficit of $26.91 billion, giving the country a ranking of 181 out of the 190 countries tracked by the CIA in The World Factbook.
What Does Your Economy Export?
India exports petroleum products, precious stones, machinery, iron, steel, chemicals, vehicles, and apparel.
According to the World Trade Organization (WTO), India exports $162.6 billion in goods and merchandise compared to only $87.4 billion in commercial services. The WTO breaks down those exports as follows:
Goods and Merchandise
- Agricultural products: 10.2 percent
- Fuels and mining products: 20.6 percent
- Manufactures: 66.0 percent
- Transportation: 12.3 percent
- Travel: 12.1 percent
- Other commercial services: 75.6 percent
To Whom Does Your Economy Export?
The WTO ranks the following countries as the top destinations for exports from India:
European Union: 20.5 percent
United Arab Emirates: 14.4 percent
United States: 10.8 percent
China: 5.9 percent
Hong Kong: 4.0 percent
What Does Your Economy Import?
India imports crude oil, precious stones, machinery, fertilizer, iron, steel, and chemicals.
According to the WTO, the country imports $249.6 billion in goods and merchandise compared to only $79.8 billion in commercial services. The WTO breaks down those imports as follows:
Goods and Merchandise
- Agricultural products: 5.6 percent
- Fuels and mining products: 37.6 percent
- Manufactures: 46.6 percent
- Transportation: 43.4 percent
- Travel: 11.6 percent
- Other commercial services: 45.0 percent
From Whom Does Your Economy Import?
The WTO ranks the following countries as the top sources imports to India:
- European Union: 14.4 percent
- China: 11.5 percent
- United Arab Emirates: 7.4 percent
- United States: 6.0 percent
- Saudi Arabia: 5.4 percent
Do You Have an Attractive Government Debt Market?
India currently has a Moody’s rating of Baal. It received this latest rating on May 24, 2006. This most recent rating was an upgrade from the Bal rating that the country had held previously. This is a positive sign for the country’s government debt market.
Central Bank Mandate
The Reserve Bank of India (RBI) has the following four objectives:
- Maintain price stability and ensure an adequate flow of credit to productive sectors.
- Maintain public confidence in the system, protect depositors’ interests, and provide cost-effective banking services to the public
- Facilitate external trade and payment and promote orderly development and maintenance of the foreign exchange market in India
- Give the public an adequate quantity of supplies of currency notes and coins and in good quality (www.rbi.org.in).
The Reserve Bank of India has foreign currency reserves of $267,814 million and gold deposits of $22,470 million.
Government Intervention in Forex
The Indian government has been known to intervene in the currency market from time to time.
Important Economic Announcements
When you are watching the economic announcements coming out of India, make sure that you keep your eye on the following:
- Interest rates
- Gross domestic product (GDP)
- Trade balance
Are You a Safe-Haven Currency?
No, the Indian rupee is not considered to be a safe-haven currency.
How Can I Trade You?
You can trade the Indian rupee using any of the following:
- Spot Forex
- Exchange-traded funds (ETFs)
- Exchange-traded notes (ETNs)