Library Week 2023-24
Creative Blog Writing Competition
Winner : - Rank- 2nd
Date :17th January 2024
Time : 10:00 to 11:30 AM
Name of Participant : Diksha Samadhan Sardar Stream : SYBCom C
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The rupee is the official currency of India the worlds fifth largest economy by nominal GDP and third largest by purchasing power parity. The rupee also serves as a legal tender for our neighboring countries like Bhutan, Nepal . IMF director says India alone is accountable for 15% of the global growth. RBI’s report states that Indian rupee is the 9th most traded currency across the globe. This shows India’s fundamental and economics resilience to re-energize economic growth. Indian has taken a step ahead to achieve this goal RBI has started Special Rupee Vostro Account ie foreign authorized bank can open special account in India this will allow investors to trade directly in rupees. A total of 18 countries have been allowed to open 60 SRVA Asian clearing Union has named rupee a trade settlement currency. Srilanka uses rupee as a foreign exchange Reserve.
There are many prerequisites of internationalizing of rupees.
1) Reduced dependency on foreign countries ,currencies-
Internationalization of rupees will reduce India’s reliance on foreign countries for international trade and transaction.
2) Strength Regional Influence –
As rupee will be global India will uphold significant position in economic world and emerge as major economic player.
To achieve the goal we face many challenges .
1) Rupee is not fully convertible -
Rupee is not fully convertible as India’s share of export is just 2% this reduces the necessity to hold rupee as a reserve currency.
2) Confidence & Perception.
The credibility and stability of India’s monetary policy & fiscal policy plays a crucial role in building confidence in rupee. Any wrong perception & uncertainty can lead to lack of confidence.
3) Competition –
Foreign currency such as dollars, Euro, Japanese Yen Chinese Yuan displacing these dominant currency is a significant challenge.
4) Adaption by Market Participants –
Convincing foreign investors, financial institution, businessman & individual to make transaction in rupees.This needs trust familiarity and confidence in a currency .
Steps the government should take :-
1) Make rupee more freely convertible –
With a goal of full convertibility by 2060, Indian trade partners and foreign investors will have to invest in capital bond eg:- Masla Bond more such hybrid instrument should be introduced to gain capital flow.
2) Increase Export –
Indian’s Economic Advisor K.V. Subrimaniam, India’s representatives at IMF stated that India can only achieve this goal after emerging as a manufacturing hub & export powerhouse. India’s share in merchandise export is only 4% & service mostly 6% increasing export will foster economic growth.
3) Encourage Exporters / Importers to trade in rupees-
Over 90% of Indian’s export is done in dollar & 80% of import is conducted in dollar .
This shows our overdependency on foreign currencies currently we export Basmati rice to Iran and import crude oil this trade settlement is done through rupees.
4) Emerging as a Major Geopolitical Player –
India is a active participant of G20, BRICS, IMEEC, SAARC, this fosters connectivity between these groups will allow rupee to attain the position .
In 2023 BRICS summit hosted by south Africa gave a bold statement of DE-DOLLERIZATION. This shows trading in local currency is important.
In conclusion -as Rome wasn’t build in a day making rupee a global reserve currency is a ongoing & continuous process. The above mentioned policy and economic resilience will surely emerge rupee as global reserve currency.
As Rupee will be globalized more, Indian will be a superpower country.
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