Finance, Forex and Investments

With the Indian economy growing so strongly, will US dollars become cheaper in India?

India is now the 2nd fastest growing economy, so will the US dollars become cheaper or more expensive in India. eg. Now it is 1 USD = 46 INR. will it become less rupees for 1 dollar or more rupees?

Public Comments

1. Usually the advantage goes to the stronger economy, so the dollar would get stronger. Indian goods and services would become more affordable. US goods less affordable at home and abroad.
2. It all depends. India currently has a much higher inflation rate than the U.S. does (9.3% http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=INR vs. 2.1% http://www.tradingeconomics.com/united-states/indicators/ which means that the rupee is likely to become less valuable than the dollar (i.e. the dollar is likely to become stronger or more expensive relative to the rupee) If the Indian central bank starts clamping down on the money supply and reduces inflation to U.S. levels, it could go the other way, but chances are it won't. For the past 2 months, the rupee has been getting stronger. It is now about 44.5 rupees per dollar. But back in November it was only 44 rupees per dollar: http://www.x-rates.com/d/INR/USD/graph120.html My guess is that the recent strengthening of the rupee is really a weakening of the dollar due to QE2 - the Fed creating a great deal of money in the hope of boosting inflation - and has nothing to do with India. You see the same pattern with the euro http://www.x-rates.com/d/EUR/USD/graph120.html and with Swiss Francs and those economies are not growing rapidly. http://www.x-rates.com/d/CHF/USD/graph120.html