Interdepartmental group set up by the Reserve Bank of India to study the internationalisation of the rupee has recommended that India look into alternatives to the US dollar and the euro because they are insufficient as a hedge against economic sanctions in a world that is becoming more polarised.
To promote the adoption of the rupee outside of Indian boundaries, the organisation has suggested a variety of methods. Allowing foreigners to hold rupee accounts in abroad branches is one of the ideas for the near future. Additionally, it has advocated for 24-hour currency trading and increased cross-border payment usage via the United Payments Interface (UPI).
standardising trade with partner countries
Standar The working group has recommended that the rupee be included among the long-term measures as one of the SDRs, which are an alternative to keeping dollar reserves and currently represent the value of the dollar, euro, renminbi, yen, and British pound.
“While the Asian crisis of 1997–1998 highlighted the need for emerging market economies to have large foreign exchange reserves to manage external shocks, it no longer seems to be a viable protection against the prospect of economic sanctions in today’s increasingly split globe. Therefore, the IDG believes that it is crucial for India to keep looking at alternatives to both the USD and the euro, according to the group’s research, which was led by Radha Shyam Ratho.
Prior to this, T Rabi Sankar, the deputy governor of the RBI, advocated in favour of internationalising the rupee because it would shield India from currency instability and lower the cost of doing business. Additionally, retaining foreign exchange reserves would be less necessary. Additionally, he had stated that the usage of the rupee would strengthen India’s negotiating position and reduce its susceptibility to outside shocks.
Standardising a pattern for conducting rupee trade through bilateral and multilateral trade agreements with partner nations is one of the actions that can be performed in the next two years, according to the panel. According to the panel, existing bilateral and multilateral payment and settlement systems might be used to settle trade in rupees and promote rupee as a second settlement currency.
