India’s efforts to internationalize the rupee are aimed at easing trade settlements with other nations, rather than contributing to de-dollarization, according to a former Reserve Bank of India official.
“India is not aspiring to make the rupee a reserve currency,” Usha Thorat, a former deputy governor, said in an interview with Bloomberg Television’s Rishaad Salamat and Haslinda Amin. “India is trying to make the rupee easier to be a currency of transaction and payments,” with its partners for its own trading needs, she said.
The world’s fastest-growing major economy is trying to use the rupee for its global payments to cut its dollar demand and also offer the local currency as a trade settlement alternative to countries facing a shortage of the greenback. The move can help the nation’s trade and businesses from exchange risks.
The role of an international reserve currency is best met by the dollar as it’s convertible and has a dominant position, said Thorat who was at the central bank for five years until 2010, serving as in charge of the local currency markets. India, which runs a current account deficit, has to finance it with accumulated reserves.
“India’s share of global trade, both exports and imports, is around 7%,” said Thorat. “Similarly the share in financial flows is also around the same. It will take a long time for India to get a dominant position in global trade.”
--With assistance from Anand Menon and Subhadip Sircar.
