Foreign exchange policies significantly influence the trade and economic dynamics of a country, particularly in a rapidly evolving economy like India. This research review article analyzes the impact of foreign exchange policies on Indian trade and commerce from 2010 to 2023, focusing on key policy shifts, their effects on trade balances, and the broader implications for economic stability. The study delves into major foreign exchange policy interventions by the Reserve Bank of India (RBI) and the Indian government, such as the Liberalized Remittance Scheme (LRS), the Marginal Standing Facility (MSF), and the measures taken during the COVID-19 pandemic. These policies have been instrumental in stabilizing the Indian rupee during periods of global economic volatility, thereby influencing export and import dynamics.

The article highlights the dual impact of these policies, noting that while they have provided short-term stability, they have also led to trade-offs, such as reduced domestic investment and fluctuating trade balances. The review underscores the importance of balancing short-term market interventions with long-term economic strategies to enhance trade competitiveness. Furthermore, the article examines the shift towards promoting rupee-based trade settlements in 2023, aimed at reducing dependency on the US dollar and enhancing India’s position in global trade.

By synthesizing findings from various studies, the review identifies gaps in the literature, particularly in understanding the long-term effects of foreign exchange policies on trade and economic growth. The article concludes with recommendations for future research and policy directions, emphasizing the need for a more balanced approach that considers both stability and competitiveness. Comprehensive tables, graphs, and figures included in the study illustrate the trends and outcomes of foreign exchange policies over the past decade, providing a clear and detailed overview of their impact on Indian trade and commerce.