The Step Towards Internationalization of Indian Rupee v2

The Step Towards Internationalization
of Indian Rupee: Boon for Indian

Economy.
The India has taken a historic move towards the internationalization of Indian Rupee (INR). The
RBI announced that it is putting in place a mechanism to settle international trade in Indian
Rupees (INR). It means exports and imports can now be denominated and invoiced in Indian
Rupee.
The key objective is to promote growth of global trade with emphasis on exports from India. It
will help to benefit everyone in EXIM ecological sphere. We will discuss that in later part of this
article.
Internationalization of Indian Rupee is in the discussion from last century when Former Prime
Minister Dr. Man Mohan Singh was finance minister in government of Late P V Narsimha Rao.
However it took many decades to take the decision on ground. Why?
The key reason is Political will is very important in such cases. The political leadership must be
willing and able to face the knock-on impacts. For example Today international payments are
largely done in US Dollars, USA will never like someone else giving jerks to its leadership.
Besides political willingness or political readiness, there are many driving forces at this moment
to take this decision. The urgent as well as important reason is to combat the INR loosing shine
against US Dollar at faster pace. Another reason is to ensure smooth trade with Russia, Iran, and
Sri Lanka etc. India is also feeling the heat of Pandemic and then Russia – Ukrain war. Inflation is
over 7% and government is in dire need to manage it. Increasing interest rate may introduce the
recession so best is to buy crude oil at lower rates and either decrease or at least not increase
further. Crude oil affects almost all of the sectors of economy so to ensure the rupee deal with
Russia / Iran may be another cause. India’s politically tall stature, will help in discounted crude
rates and hence save domestic economy. Third very important reason is to Provide ways to do
trade with India for countries not able to trade in USD. It will help Indian Exporters and
importers to reap the economic advantages of low or almost no competition markets. It will not
only boost Indian economy but also minimize the dependence on USA for payment settlements.
The increasing interest of international community to trade in Indian rupee make this time as
most opportune time. Today Russia and Iran may have hard pressed needs to trade in Indian
rupee while some other countries like UAE, Venezuela, SAARC countries (excluding Pakistan)
may also have some trade in Indian Rupee.
The impacts of making trade in rupee are multi-dimensional. It will help in currency
stabilization; Risk minimization as exporters will be buying in Indian rupee and selling in same
currency; Empower Indian international traders to do business with low competition markets
and hence boost Indian exports as well as trade deficits.
Beside the benefits to India, it will have a lot of impacts in global space. It will help countries to
do international trade which are under sanctions by USA. India is also developing messaging
specifications for efficient international transactions, which means an alternative to SWIFT may
also be on the card. This will boost our international trade sovereignty at the same time will
offer alternative to trade in USD through SWIFT network.
The primary benefit of this move is to enable international trade in Indian rupee but govt has
also offered some other avenues for surplus money in Rupee Vostro account. You can use the
surplus fund in India Govt Bonds or securities. It will also help India to increase demands for
Indian govt securities.
Now the question is how to do that, what is the mechanism? So first of all the bank which falls in
Authorized Dealer category bank can apply at RBI to offer Vostro account facility in a country.
For settlement of trade transactions, the concerned banks will require Special Rupee Vostro
Accounts of correspondent bank/s of the partner trading country. To make the transactions
efficient and safe, messaging specifications will be developed. It may be an indication that in
future India may have a parallel system to SWIFT.
In summary this is a great move by Reserve Bank of India but success will depend upon how
politically its supported.
Dr. ANIL KUMAR GUPTA

H.C. (International Business) B.Tech (Electronics & Instrumentation), MCSE, ITIL (UK), ISEB
High Accomplished Business Coach for Cross Border Business Expansion
Chairman - Connect Ventures- A Compliance Management Service Provider for Cross
Border Businesses
Editor - NOLEGEIN Journal of Entrepreneurship Planning, Development and Management
Mentor for Change – Atal Innovation Mission, Niti Ayog
Ex Convener – PHD Diaspora Forum

Ex Convener – Foreign Affairs Department of Bhartiya Janta Party
Jury @ IITs, IIMs, Universities, Management Colleges and Startup Incubators and Business
Platforms
International Author | Tedx Speaker | Research Scholar | Keynote Speaker
Dr. Anil Kumar Gupta, a premier think tank and business consultant, has helped over 8000
entrepreneurs. He has been featured by leading business media houses of India. He helps to
Setup Company, advice about structuring, manage compliances for foreign entities. He helps
through his 5Cs i.e. Coaching, Consulting, Connection, Collaboration and Co-Creation.
He is strong believer of “Collaborative Efforts for Collective Growth”. He facilitates ventures to

Connect, Collaborate and Cocreate and hence facilitates ventures to make great collaborative
synergy in global space. Inspired with his vision, he founded Connect Ventures
(www.connectventures.in / www.corporatesmith.in) , a boutique cross border advisory firm for
MSMEs to setup and manage compliances for legal entities (Companies) abroad and transform
their MSMEs into MNCs.
He can be followed at www.linkedin.com/in/startupmentor or reached through whatsapp at +91

999 998 1613.

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The Step Towards Internationalization

of Indian Rupee: Boon for Indian

Dr. ANIL KUMAR GUPTA

Editor - NOLEGEIN Journal of Entrepreneurship Planning, Development and Management

Mentor for Change – Atal Innovation Mission, Niti Ayog

Ex Convener – PHD Diaspora Forum

International Author | Tedx Speaker | Research Scholar | Keynote Speaker

He is strong believer of “Collaborative Efforts for Collective Growth”. He facilitates ventures to

He can be followed at www.linkedin.com/in/startupmentor or reached through whatsapp at +91

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