India’s exchange rate policy is under renewed focus as experts advocate for allowing the Indian Rupee (INR) to respond more freely to market forces. This shift toward a more flexible exchange rate regime could enhance India’s economic resilience, helping the Rupee better reflect the country’s trade dynamics and global economic conditions.
Currently, the Indian Rupee’s value is influenced by regulatory interventions to stabilize it against foreign currencies. While these measures have provided short-term stability, they may limit the Rupee’s capacity to adjust naturally in response to external pressures, such as trade imbalances, inflation, and fluctuating global capital flows. By letting market dynamics take a greater role in determining the INR’s value, the currency could become a more accurate indicator of India’s economic strength.
Supporters of a freer exchange rate argue that an adaptable currency will make India more competitive globally, as it can adjust organically to both domestic and international conditions. They believe this shift could attract more foreign investments, boost exports, and reduce the pressure on foreign exchange reserves, creating a more sustainable financial environment.
