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RBI panel charts path to internationalise rupee
July 06, 2023
An inter-departmental group (IDG) of the Reserve Bank of India (RBI), set up to examine internationalising the rupee, has recommended steps for transactions in the domestic currency popular in other countries, thereby reducing dependence on the dollar.
The panel, headed by Radha Shyam Ratho, suggested a short-term, a medium-term, and a long-term recommendation for this. “The internationalisation of a currency is interlinked with economic progress, especially its prominence in global trade. The measures would involve steps towards (in parallel) liberalising the capital account, promoting international usage of INR, and strengthening financial markets.”
The panel said capital account convertibility was not a pre-condition for internationalising the rupee, or vice versa, and that the current level of capital account convertibility gave enough room for initiating steps for internationalisation.
Russia’s invasion of Ukraine last year and the resultant sanctions made many countries cautious of the price they might have to pay if they are subject to similar sanctions by Western governments, the report said.
Such geopolitical developments apart from an increase in linkages of the Indian economy with the rest of the world in terms of trade and capital flows has set the stage for the emergence of various other currencies, including the rupee, as prospective ones for use in international transactions, it said.
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