The Indian government, during the economic overturn, had announced incentive packages of over $100 billion to support the local economy. This, however, led to a whopping increase in its public debt and governmental expenditure to make it 50% of its GDP. The Reserve Bank ofIndiawhich is also its Central bank has started issuing new currency in accordance with its monetary policy (Mishra, 1, 2010). A rapid rise in inflation due to the unequal demand and supply, increase in the money supply and hefty government public expenditure could all lead to a situation of a high supply-side inflation. It is expected that the Reserve Bank ofIndiawill try to curb inflation and increase money supply which will lead to an increase in the interest rates.
There is immense potential in the Indian currency rupee that could be achieved, since; the after effects of the global recession are gradually fading away, giving way to a highly increasing aggregate demand and an expanding world economy. India’s Forex market and its foreign fund reserve can benefit from the growing increase in interest of a large number of countries to invest into the economy (Financial crisis, 1, n.d).
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