And, amid the continuous weakening of the rupee, the idea was to promote growth of global trade with an emphasis on Indian exports and to buttress the increasing interest of the global trading community in rupee.
The decision was taken against the backdrop of a host of geopolitical tensions and global economic currents, including the US sanctions on the use of the dollar for transactions with Iran and Russia.
Thereafter, via a circular dated July 11, 2022, the central bank allowed the international settlement of trade in Indian Rupees for export and import of goods and services. The State Bank of India’s Ecowrap report had also recommended a conscious effort to ‘internationalise’ the rupee given the capital outflows from emerging market economies, including India, and currency depreciation. It involves promoting the rupee for import and export trade, and then other current account transactions followed by its use in capital account transactions.
‘Internationalisation’ implies that the rupee can be freely transacted by both resident and non-residents, and can be used as a reserve currency for global trade. In December 2022, India saw its first settlement of foreign trade in rupee with Russia – as part of the ‘International Settlement of Trade in Indian Rupee’ mechanism initiated by the Reserve Bank of India (RBI) in July last year.Īmid talks towards finalising a free trade agreement with India, Bangladesh is also considering the settlement of bilateral trade in Indian rupees.Īlmost a year ago, the RBI’s report on currency and finance had said that the ‘internationalisation’ of the rupee is “inevitable.”
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