The Reserve Bank of India (RBI) is working on simplifying and liberalizing foreign exchange regulations to facilitate ease of doing business in the country, RBI Deputy Governor H.R. Khan told Indian exporters on Today.
The Indian central bank is working in consultation with the central government and the steps taken so far by both were aimed at reducing the “external sector vulnerabilities,” a central bank statement said.
India is Asia’s third-largest economy by Gross Domestic Product and second only in China in total population with over 1.2 billion people. Despite of this, the country barely has a FX market due to stringent capital controls and other limiting regulations. Most so-called “Indian” online FX brokers are actually focused on servicing immigrant Indian communities abroad but might benefit greatly if and when the giant market will open up.
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In May 2014, when right wing politician Narendra Modi became the Prime Minister of the country, many analysts expressed hope that he will push hard for the liberalization of India’s economy. A year after, we can say that he succeeded in injecting optimism to a seemingly stagnant and outdated economy beforehand and also largely fulfilled its promise to tame inflation. However, contrary to the high expectations, the Modi government hasn’t pushed hard at all for financial reforms and relied mostly on gradual liberalizing steps to modernize the Indian economy.
For now the FX regulations reforms the Indian government and central bank are looking into are aimed at helping cross border trade only. It remains to be seen if any opening allowing currency trading or even online trading will be considered, perhaps in a future step if not this time.