77th Independence Day: The Rise Of Indian Rupee In The World; Will INR Replace US Dollar?

Is Indian Rupee is in the Race to take over the American Dollar? More than 18 countries have agreed to use Rupee for International trade with India. After this more than 35 countries have shown their interest to trade in Indian Rupee.

The global importance of the Indian Rupee has risen in the last few years after India-Russia, India-UAE and India-Singapore agreements on trade deals in INR. Which has also led to a decrease of the use of dollars in international trade. 

But will this lead to India becoming a $5 Trillion economy? And how will it impact Indians all over the world? 

We’ll answer that but let’s quickly look at the factors that are setting the stage for Rupee to replace Dollar. 

Ukraine-Russia War 

After the western sanctions removed Russia from the Swift network, dollars went out of question to be a currency for the trade. So, Russia and India decided to start the trade in INR using the Vostro and Nostro accounts. 

Middle East Interest 

India has been able to strike deals with UAE and Saudi Arabia for bilateral trade in Rupee which has been a great success for our ties. 

Alternative to Dollar 

Dollar which used to hold 80% of the global trade market in 1990s, dropped to 59% in 2022. The government is reportedly looking to bring countries that are short of dollars into the mechanism. 

According to finance expert Nikhil Varma, strengthening of dollar in last many months have led to expensive imports for most countries around the world, creating an obvious need for an alternative, so the Indian Rupee can play the role of the reliever for these countries. 

Recently, Singer Mika Singh posted a video of him paying at a store in Qatar with Indian Rupee. 

This is the next and the most important subject that Indian govt has to focus upon. Acceptance of the Indian Rupee Worldwide. 

Whether you travel to China, Europe, Argentina or Cuba, Dollars have an advantage of being accepted while shopping or renting hotels. 

Indian Rupee has to reach the pocket of foreign travelers and investors. 

So, a Revolution for Rupee has already started by the present govt to Internationalize the Rupee. But how did India start this revolution? 

By introducing the Vostro-Nostro Accounts

 

Vostro and Nostro accounts are the replacement for SWIFT system. Vostro-Nostro, the words comes from the Latin word for “yours,” and ‘ours’, In Vostro and Nostro system, two banks setup accounts directly bypassing the involvement of any third-party banking system for the trade.  

The move is aimed to promote the growth of global trade, with emphasis on exports from India, as well as pushing rupee as an international currency. 

UPI involvement

 

From the great Eiffel Tower, UPI (Unified Payments Interface), India’s very own payment system which was recently launched in France.  

According to India-briefing.com On February 13, 2023, Union Minister Ashwini Vaishnaw said that India had signed memoranda of understanding (MoUs) with 13 countries that want to adopt the UPI interface for digital payments. 

This will gradually help travelers to pay using UPI without the hassle of currency exchange. 

Countries with which India has signed the MoU are- 

Singapore 

Nepal 

Bahrain 

Bhutan 

UK 

Oman 

France 

UAE 

Singapore 

Malaysia and others 

 

Rupay cards 

India’s homegrown Rupay Card has is set to compete with global card networks such as Visa and Mastercard. Launched in 2014, RuPay cards are issued by more than 1,100 banks including state-owned lenders, private banks, regional rural and cooperative banks, as per its website. There are about 672 million RuPay debit cards. Bhutan, Singapore and the United Arab Emirates and Nepal have already operationalized RuPay cards. But more needs to be done to set Rupay card at international standards. 

After the efforts of RBI, Rupee has almost become like a reserve currency in South Asia. 

For example, it is also being used at some places where there’s no involvement of India. Like Sri Lanka has decided to use Rupee in Oil trade with Iran, so it might as well replace Dollar with Rupee in Petrol-dollar trade. 

But this is nothing new for India, do you know that in 1960s, India was also called as the ‘Central Bank of the East’ because of the influence of the Indian Rupee in the Middle east and South Asia.  

And now the government is swiftly trying to bring to era back, as right now also, people in Sri Lanka and UAE have been posting their videos after paying in Indian Rupees in foreign countries. 

But who will it impact directly? 

Everyone, from small businesses to big industries, from traders to buyers.  

Acceptance of the Indian Rupee will ease the transfer process 

Boost the ease of doing business 

Stability In Balance of payment by overcoming the fluctuations in international trade 

Boost in Indian Production 

Total Rupee dominance is surely going to take a huge amount of time, but there’s another problem that India is facing right now related to international trade that’ll be a major concern. 

Recently Russia-India has been facing issues with Rupee as a medium of exchange for trade. Because of the trade deficit.  

Trade takes place when there’s an import and export from both sides, but right Indian side is importing more than its exports to Russia which has led to increase in the rupee denomination in India. 

Russian Foreign Minister Sergei Lavrov highlighted this issue in the Shanghai Cooperation Summit in Goa this year. 

It might take some time for the currency to top the charts, but clearly the stage is set for the Indian Rupee to replace the dollar in the coming years. It is not very far when the Bharatvarsh will see the use of Indian Rupee in most parts of the world.