Top 2 Money Transfer Providers for USA to India

India gained independence from Great Britain in 1947, but kept the rupee on a direct peg to the British pound (GBP) between 1950-1971, with the exception of two currency depreciations in 1966 and 1971. The rupee was then shifted to a direct USD peg for the next four years, at a rate of Rs8.39. India lifted the direct peg in September 1975 and moved the rupee to a managed float regime, where its value was loosely pegged to a basket of currencies, made up of India’s primary trade partners.

However, India’s trade deficit rose considerably in the following decades, making it difficult for the Reserve Bank of India (RBI) to maintain its exchange rate targets. Upon independence, the rupee’s value was roughly equal to that of the USD, but subsequent devaluations has pushed it far below. The rupee was further devalued in 1991 when the government faced a serious balance of payments crisis; the exchange rate fell to Rs17.90 to the dollar in 1991, and further to Rs31.37 by 1993, when the rupee was placed on a liberal (floating) exchange rate regime.

With a few exceptions, the dollar has steadily gained against the rupee in the last twenty years. The rupee lost value in the years following its liberalisation in 1993 and dropped below an exchange rate of Rs42 to the dollar for the first time in June 1998. Between August 1998 and April 2007, the USD to INR exchange rate fluctuated between Rs42 and Rs49, with no sharp jumps in either direction.

With the onset of the subprime mortgage crisis in the United States in 2007-2008, the US dollar lost ground against most global currencies. The dollar dropped from Rs42 in April 2007 to Rs39.36 by October of that year - the most rapid change seen since the late 1990s. However, the crisis quickly spread from the US to Europe and the rest of the world, driving down emerging market currencies. The dollar regained value against the rupee to reach a then-historic high of Rs51.13 in March 2009.

The exchange rate wavered between Rs44 and Rs50 for the next two years, but the US dollar began a rapid rise in mid-2011. Not only does India face rising government deficits, but investors have grown wary of emerging markets, commonly referred to as BRIC countries (Brazil, Russia, India and China) in the context of US economic recovery. In May 2013, the US Federal Reserve announced that it planned to reduce its purchases of foreign bonds, a policy which had helped to preserve economies around the world during the worst of the economic downturn. Although this never materialised, the news alone caused investors to withdraw capital from a number of emerging economies, including India, Turkey, Brazil, South Africa and Indonesia. Investors worried that these markets would crumble without an influx of capital from the US; once considered the engines of economic growth during the global downturn, these countries were then dubbed the “Fragile Five.”

From a trough of Rs44.4 in July 2011, the USD shot up to a record high of RS63.64 by September 2013, at the height of concerns over emerging market stability. Between late 2013 and mid-2014, the USD lost some value, bolstered by the continuation of the Fed’s stimulus programme and anticipated economic reforms from India’s newly elected government.

The dollar has recovered strength in late 2014 and early 2015, on the back of economic growth and improved employment data. The USD gained value against all major currencies by 2014 year-end, for the first time since 2000. The USD to INR exchange rate rose again to a near-peak level of Rs62.1 in January 2015, and the dollar’s rise is expected to continue through the year, which does not bode well for India’s beleaguered economy and exchange rate.