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Internationalization of Indian Rupee



  Apr 12, 2024

Internationalization of Indian Rupee


Prime Minister Narendra Modi’s recent call for the Reserve Bank of India (RBI) to prepare a 10-year strategy to make the Indian rupee a globally “accessible and acceptable” currency is a significant step. This move is driven by the projection that the Indian economy will soon be among the world’s three largest economies, trailing only China and the United States.
 

However, for the rupee to truly go global, the Indian economy would also need to globalize. This means not only increasing demand abroad for Indian products but also making the rupee fully convertible.
 

Currently, the rupee is partially convertible, with limited FDI and FPI ( though liberalising continuously) and with the privilege of converting large sums restricted to regulated entities. However, if we expect our currency to hold liquidity appeal worldwide, like the US dollar, capital controls would need to be dropped more.
 

In conclusion, the journey towards a globally convertible Indian rupee is a complex one, requiring careful planning and execution. It involves not just economic and financial reforms, but also a broader process of globalizing the Indian economy.



 
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