The value of the Indian Rupee (INR) is influenced by various economic and political factors, including the value of the US dollar (USD). A strong dollar tends to weaken the value of the Rupee and vice versa. This is because a large part of India's imports are done in dollars, and a strong dollar makes imports more expensive.
Foreign investment in India may decline when the dollar is strong, as investors may shift their investments to countries where they can get better returns in dollars. On the other hand, a weak dollar can lead to a stronger Rupee and a positive outlook for the Indian economy.
Difference between Dollar and Rupee
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US Dollar $ |
Indian Rupee ₹ |
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Issued by the Federal Reserve System (The Fed) |
Issued by the Reserve Bank of India (RBI) |
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World's most widely traded currency and is considered the global reserve currency. |
Indian Rupee had primarily been a regional currency used within India. But, recent India's rupee trade settlement mechanism, set up by RBI in July 2022, is attracting interests from countries like Russia and Sri Lanka. More international trade in INR will strengthen it. |
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Fed sets monetary policy for the US |
RBI sets monetary policy for India |
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Market-oriented economy |
Mixed economy |
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Freely floating currency |
Floating exchange rate regime |
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Lower inflation rate compared to India (Stable value for the US Dollar) |
Higher inflation rate than US. Rupee value becomes less stable than US Dollar and hence, less attractive for global trade. |
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Fed sets interest rates for the US |
RBI sets interest rates for India |
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US has a higher GDP compared to India |
India has a lower GDP compared to US |
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US is generally considered more politically stable than India |
India is also becoming more stable since the Modi regime. G20 presidency given to India is also a testimony of stabler Indian economy |
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US is a major trading nation |
India is rapidly emerging as a major trading partner |
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US has a higher public debt compared to India |
India has a lesser public debt compared to US |
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US is rich in natural resources |
India is less endowed in natural resources than US |
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US is a leader in technology |
India is rapidly developing its technology sector |
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US Dollar is widely used as a currency of export |
Indian Rupee is beginning to be widely used as a currency of export |
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US has a strong geopolitical influence |
India is also developing its geopolitical influence at a fast pace |