SHARETIPSINFO >> Articles Directory >>Where does India stand in global Forex market?


The daily turnover of the Global Forex market is presently estimated at US$ 3 trillion. Presently the Indian Forex market is the 16th largest Forex market in the world in terms of daily turnover as the BIS Triennial Survey report. As per this report the daily turnover of the Indian Forex market is US$ 34 billion in the year 2007. Besides the OTC derivative segment of the Indian Forex market has also increased significantly since its commencement in the year 2007. During the year 2007-08 the daily turnover of the derivative segment in the Indian Forex market stands at US$ 48 billion.

The growth of the Indian Forex market owes to the tremendous growth of the Indian economy in the last few years. Today India holds a significant position in the Global economic scenario and it is considered to be one of the emerging economies in the World. The steady growth of the Indian economy and diversification of the industrial sectors in India has contributed significantly to the rapid growth of the Indian Forex market. Let us take a watch on the Indian Forex trading scenario since the early days.

The Forex trading history of India dates back to 1978, when Reserve Bank of India took a step towards allowing the banks to undertake intra-day trading in Foreign exchange. It is during the period of 1975-1992 when Reserve Bank of India, officially determined the exchange rate of rupee according to the weighed basket of currencies with the significant business partners of India. But it needs to be mentioned that there are too many restrictions on these banks during this period for trading in the Forex market.

The introduction of the open market policy in the year 1991 and implementation of the new economic policy by the Govt. of India brought a comprehensive change in the Forex market of India. It is during the month of July 1991, that the rupee undergone a two fold downward adjustment and this was in line with inflation differential to ensure competitiveness in exports. Then as per the recommendation of a high level committee set up to review the Balance of Payment position, the Liberalized Exchange Rate Management System or the LERMS was introduced in 1992. The method of dual exchange rate mechanism that was part of the LERMS also came into effect 1993. It is during this time that uniform exchange rate came into effect and that started demand and supply controlled exchange rate regime in Indian. This ultimately progressed towards the current account convertibility that was a part of the Articles of Agreement with the International Monetary Fund.

It was the report and recommendations of the Expert Group on Foreign Exchange, formed to judge the Forex market in India that actually helped to widen the Forex trading practices in the country. As per the recommendations of the expert committee, Reserve bank of India and the Government took so many significant steps that ultimately gave freedom to the banks in many ways. Apart from the banks corporate bodies were also given certain relaxation that also played an instrumental role in spread of Forex trading in India.

It is during the year 2008 that Indian Forex market has seen a great advancement that took the Indian Forex trading at par with the global Forex markets. It is the introduction of future derivative segment in Forex trading through the largest stock exchange in country – National Stock Exchange or NSE. This step not only increased the Indian Forex market volume too many folds also gave the individual and retail investor a chance to trade at the Forex market, that was till this time remained a forte of the banks and large corporate.

Indian Forex market got yet another boost recently when the SEBI and Reserve Bank of India permitted the trade of derivative contract at the leading stock exchanges NSE and MCX for three new currency pairs. In its recent circulars Reserve Bank of India accepting the proposal of SEBI, permitted the trade of INRGBP (Indian Rupee and Great Britain Pound), INREUR (Indian Rupee and Euro) and INRYEN (Indian Rupee and Japanese Yen). This was in addition with the existing pair of currencies that is US$ and INR. From inclusion of these three currency pairs in the Indian Forex circuit the Indian Forex scene is expected to boost even further as these are some of the most widely traded currency pairs in the world.

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