Is India ready to internationalize the Rupee? To understand that, it is essential to understand what an international currency is. Money is global if the non-residents stand willing and able to deal and invest in that currency’s assets.
All of this depends on three powerful stances. First, the dispensing country must have a substantial scale in gross domestic output and worldwide commerce. Though the Indian economy is evolving at an 8 percent rate, the current share of international trade is relatively small. Second, the value of the currency must be stable over time. A coin is deemed stable when the standard level of prices does not alter excessively. There’s almost no headway made to enhance financial stability in India; no reforms by the banking systems settled the problem. Increasing financial stability will require pressing rectifications in the banking systems of India. Finally, the currency must be liquid. A coin is liquid when considerable assets can be purchased and traded in the money without noticeably impacting its value. India significantly lacks a liquid currency market.
The RBI’s perspective
The Reserve Bank of India stated that the internationalization of the Rupee is inevitable, but it would tangle and twist the various monetary policies. It said the Internationalisation of the currency would potentially limit the central bank’s authority to regulate the domestic money supply.
The bank acknowledged price stability as the most critical standpoint in internationalizing the Rupee, adding to which is the inflation rate in India thwarts the use of the Rupee as an international currency.
To do or not to do?
The internationalization of the Rupee is an impractical and fruitless decision. Scaling, stability in the markets, and liquidity are vital economic goals of India that the country is yet to achieve. This can be overseen by solid financial foundations and a strategy-steered atmosphere.
