Internationalization of Indian Rupee
The Reserve Bank of India’s (RBI) recent announcement of creating a mechanism for international trade settlements in rupees came at a right moment. According to the RBI, the idea is designed to “promote growth of global trade with emphasis on exports.’ However, the implications of internationalizing rupee go beyond the ‘trade settlements,’ and it actually enables the India to stand on its own legs in the international arena. This will eliminate the fear of unwarranted trade sanctions of the US and European Union. Gone are the days, where the US currency ruled the unipolar world. In the emerging multi-polar world, there shouldn’t one or two currencies dictate terms to the rest of the world. With this bold initiative, India emerged as a clear contender to become a soft superpower.
Recently, the State Bank of India (SBI) proposed that RBI should make a "conscious effort to internationalize the rupee". The SBI in its Research Report “Ecowrap" stated, "The Russia-Ukraine war and the disruptions to payments caused by it, is a good opportunity to insist on export settlement in rupees, beginning with some of the smaller export partners." And RBI swiftly responded to this call.
Overall, it’s a really good move. When the nation is growing at the rate of over 7%, we certainly allow our traders to use rupee as the ‘settlement currency.’ In the US dollar dominated world, it may take some time for other countries to accept the rupee based trade. Considering the size of the Indian market, most of the countries will start to accept rupee as their trade currency. And this will enhance the possibility for us to reduce the trade deficit.