Indian Currency in International Trade: Following three major decisions by the RBI, the Indian rupee’s share in international trade will increase and its dependence on the dollar will decrease. This will strengthen the Indian economy and benefit traders.
India’s economy continues to strengthen, and its impact is now being felt in international trade. Three key decisions recently taken by the Reserve Bank of India (RBI) are expected to enhance the Indian rupee’s global dominance. Following the RBI’s three-day Monetary Policy Committee meeting, Governor Sanjay Malhotra announced these steps, aiming to reduce dependence on foreign currency, which will provide a new dimension to the country’s monetary policy and global trade relations.
What are the RBI’s three key steps?
The first step is to establish transparent reference rates for the currencies of India’s major trading partners. This will increase transparency and trust in rupee transactions, and encourage traders to transact business in rupees without any hesitation.
The second major step is the widespread approval of the Special Rupee Vostro Account (SRVA) to promote investment in corporate bonds and commercial papers denominated in Indian rupees. This account will allow foreign banks to settle trades directly with Indian banks in rupees. This will not only reduce dependence on the US dollar but also protect the economy from the risks of exchange rate and currency crises.
The third decision is that authorized Indian banks will now be able to provide loans in Indian rupees to expatriate citizens of Bhutan, Nepal, and Sri Lanka for bilateral trade. This initiative is a major step towards strengthening economic ties with smaller neighboring countries and gaining international recognition for the Indian rupee.
The Rupee’s Rising Credit Rating and Impact on the Economy
These decisions will directly impact the country’s monetary situation and current account deficit. As dependence on foreign currency decreases, the current account deficit will remain under control, and the country’s economy will remain resilient to external shocks. According to the RBI, India’s external sector is now stronger than ever, and the bank is prepared to take appropriate action if needed.
Governor Sanjay Malhotra raised the country’s GDP forecast from 6.5% to 6.8%, while inflation is expected to range from 2.6% to 4.5% in the coming quarters. This is a positive sign for India’s economic stability and growth.
