| The Indian Rupee has evolved to great acceptance | | | | Telecom by Bharti etc. These global acquisitions |
| Worldwide since its inception by Sher Shah Suri in the | | | | further cement the arguments in favour of INR's |
| 16th century in the form of copper coins when 40 | | | | repute as internationally accepted currency. As India's |
| copper coins were said to constitute Re 1. The | | | | bilateral ties further and strengthen, the Indian |
| period of relevance in its history is the 20th century. | | | | Rupee's demand has also increased on account of |
| It is in this century that it underwent massive regime | | | | India's favourable trade balance with her trading |
| changes from being coupled to Pound Sterling in 1928 | | | | partners. Recently India and Brazil entered into a |
| to the Dollar/Gold Standard in 1948 to a basket of | | | | Currency Swap agreement to boost their trade |
| currencies in 1973 and finally settling with the Floating | | | | finances. |
| Rate regime at the behest of the IMF in 1991. It may | | | | The other issue which needs due attention is that of |
| seem that the journey has been long and arduous | | | | excessive capital inflows. With India poised to post |
| but the benefits are for us and our future generation | | | | double digit growth in the coming years with its |
| to reap. It is in the context of globalistion, | | | | Economy entering Rostow's Take off stage, foreign |
| liberalisation and privatisation that we shall study the | | | | entrepreneurs seek to take advantage of India's new |
| impact of the present Floating rate regime the INR | | | | and improved business environment. The INR is |
| adheres to on the Indian economy in terms of | | | | poised to appreciate dramatically in the coming time |
| business profitability, foreign debt and the prospects | | | | and thus pose a different kind of challenge for the |
| of INR as an International Reserve Currency. | | | | Indian entrepreneurs. As the INR appreciates the |
| The Indian rupee abbreviated as INR adopted the | | | | Indian entrepreneurs who access the foreign markets |
| Floating Rate regime in 1991 when India opened up its | | | | to raise capital/loan would be advantaged as |
| Economy to the Rest of the World in tune to the | | | | compared to those who do not. This implies that GoI |
| promises she made to the International Monetary | | | | along with RBI need to further liberalise their ECB |
| Fund (IMF). India also had to devalue its currency on | | | | norms to encourage the Domestic entrepreneurs to |
| two occasions in 1991, once on July 1st and then on | | | | raise foreign loans as repayment of the foreign debt |
| July 3rd as per IMF pre-conditions to address its | | | | in INR terms would result in FOREX gain. |
| ballooning trade deficit. INR devaluation was a blessing | | | | Another issue that needs to be urgently addressed is |
| in disguise for the Indian exporters in the form of | | | | the fall in the book profits of the domestic firm |
| incremental FOREX earnings as INR gradually | | | | having Transaction/Translation/Economic exposure. |
| depreciated primarily on account of India's inability to | | | | As the AS11 (accounting standards) require the firms' |
| attract Capital flows because of an unhealthy | | | | to make adjustment for the Mark-to-Market Gain |
| business environment on account of sub-standard or | | | | Loss in their balance sheet, any INR appreciation |
| non-existent infrastructural facilities, long gestation | | | | would have to be reported as FOREX losses thus |
| periods, lack of skilled labour, a subdued business | | | | reducing shareholder's wealth. This issue may be |
| environment because of lack of laws, licensing raj etc. | | | | addressed by encouraging the firms with Foreign |
| But the times have changed and so has the repute | | | | loans to go for CIRS (Currency and Interest Rate |
| of the INR in the World community. As per UNCTAD | | | | Swaps) and greater hedging opportunities. Currently |
| Report 2008-09 India reported the highest growth of | | | | only $-Re, Pound-Re, Yen-Re and Euro-Re currency |
| 85% YOY in its FDI inflows from $25bn to $46bn | | | | futures are available in the stock markets but as |
| and was the 9th largest FDI recipient in the World in | | | | India's bilateral trade grows, she would need to |
| absolute terms. The adoption of the Liberalised | | | | introduce a whole new variety of Currency Futures if |
| Exchange Rate Market System (LERMS) and the | | | | she needs to safeguard her economy against |
| External Commercial Borrowing norms have given the | | | | Exchange Rate volatility. |
| Indian entrepreneurs the much needed impetus to | | | | India has shown great resilience to the Financial and |
| take their businesses abroad and raise capital from | | | | Economic crisis of 2008 but with changing times as it |
| foreign markets in form of ADR, GDR, FCCB, and | | | | assumes greater responsibility on an International |
| even approach the World Bank for cheaper and long | | | | scale, she would need to ensure greater financial and |
| term loans especially for social development purposes. | | | | economic stability of its domestic economy with the |
| For instance, a few of the major acquisitions by the | | | | introduction of timely reforms and regulations as |
| Indian Companies abroad are the acquisition of | | | | deliberated above. |
| Novalis by Hindalco, JLR and Corus by Tata, Zain | | | | |