Key Factors That Can Strengthen the Indian Rupee
The value of the Indian Rupee (INR) appreciates (moves up) when its demand increases relative to its supply in the global foreign exchange market. Here’s how the Rupee can strengthen: Key Factors That Can Strengthen the Indian Rupee 1. Higher Foreign Investment Inflows Foreign Direct Investment (FDI): Increased FDI in sectors like manufacturing, tech, or infrastructure boosts demand for INR, as foreign investors exchange their currency for Rupees to invest. Foreign Portfolio Investment (FPI): Rising inflows into Indian stock and bond markets (e.g., during strong economic growth or bullish market trends) increase demand for INR. 2. Improved Trade Balance Export Growth: Higher exports (e.g., IT services, pharmaceuticals, textiles) generate foreign currency inflows, which are converted to INR, raising its demand. Reduced Imports: Lower dependence on imports (e.g., oil, electronics) reduces the need to sell INR for foreign currencies, curbing Rupee depreciation. 3. S...