India To Float Rupee

Tuesday, March 21, 2006

The world's biggest democracy does the move the USA so impatiently expects from China.
India is ready to float the Rupee and will remove forex controls, enabling Indians to invest abroad, Bloomberg reported last weekend. India's official foreign reserves rose from close to zero to currently $144 billion sinced the early 1990s. Until now the Indian Rupee was only convertible for trade in goods and services.
India's flourishing economy, pacing ahead at growth rates in excess of 8%, has bolstered the currency. The Bombay stock exchange trades at historic highs thanks to deregulation, enabling foreigners to invest in Indian securities.

Rupee/US$

GRAPH: India's currency has reversed its multi-decade downtrend and stabilized against the US dollar.
A look at the Rupee/Euro chart adds even more appeal to the Rupee.

Rupee/Euro

GRAPH: The Rupee managed to eke out a gain of close to 10% against the Euro in the last 15 months.
There is one flaw in the rosy picture, though. While India has managed to hold inflation under control despite its higher energy bill, money supply shows the same runaway trend as in so many countries these days. Government figures show a year-on-year M3 growth rate of 16.4% in January 2006, overshooting projections of 14.5%.

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