Page 26 - The Indian EYE 071423

BUSINESS EYE JULY 14, 2023 | The Indian Eye 26

Plans rolling for globalization of rupee as

Asian countries set to ditch the dollar

The ACU arrangement is one of the few deals being worked out by India to globalize the rupee and make it

more acceptable for international trade settlements

OUR BUREAU
New Delhi/Mumbai
n a major development for inter-
national trade, nine central banks
Ilinked to a South Asia-focused
clearing house have reached a con-
sensus to settle trade in local curren-
cies, including the Indian rupee, to
reduce dependence on the US dol-
lar and the euro. All the members
of the Asian Clearing Union, which
includes all South Asian countries
as well as Iran and Myanmar are on
board with the plan.
India will likely lead in the set-
tlement of trades in the ACU, which
had transactions worth $28.8 billion
in 2021, a surge of nearly 55% in a
year. India controls nearly 93% of
the ACU’s credit positions as of May,
making it the most influential mem-
ber in the group. The arrangement
is one of the few deals being worked
out by India to globalize the rupee
and make it more acceptable for in- The higher usage of the rupee in the invoicing and settlement of international trade, as well as in capital account transactions,
ternational trade settlements.
The change is part of an emerg- will give it a progressive international presence (ANI)
ing global movement to form trade
blocs that rely less on the dollar. Un- global bond indices; and providing mechanism fructifies then it may go prospective currencies for use in in-
der the proposed plan, transactions equitable incentives to exporters for a long way in internationalizing the ternational transactions, it added.
will be invoiced in local currencies rupee trade settlement. In the long- Indian currency rupee in the long run. Stating India as one of the fast-
and settled once in two months, said run, its recommendations included A currency can be termed “interna- est-growing countries which showed
the people who asked not to be iden- a review of taxes on Masala bonds tional” if it is widely accepted world- remarkable resilience even in the
tified as the discussions are private. If (Masala bonds are rupee-denomi- wide as a medium of exchange. face of major headwinds, the IDG
there is any surplus currency left, In- nated bonds issued outside India by To examine issues related to in- said it feels that the rupee has the
dia can offer rupees in exchange and Indian entities); international use of ternationalization of INR and suggest potential to become an international-
accumulate the currency, they said. Real Time Gross Settlement (RTGS) a way forward, the RBI had consti- ized currency.
Currently, dollars, euros and yen are for cross-border trade transactions; tuted an Inter-Departmental Group It noted the higher usage of the
used for settlement. examining taxation issues in financial (IDG) in December 2021, chaired by rupee in the invoicing and settlement
Meanwhile, in another important markets to harmonies tax regimes Radha Shyam Ratho. of international trade, as well as in
move, the Inter-Departmental Group of India and other financial centers; The IDG report noted that the capital account transactions, will give
(IDG) constituted by the Reserve and allowing banking services in ru- international monetary and finan- it a progressive international presence.
Bank of India to examine issues relat- pee outside India through off-shore cial system has moved towards being Against that backdrop, the IDG
ed to the internationalization of the branches of Indian banks. multipolar as reflected in the steadily said it deliberated on all the issues
Indian rupee and has come up with a The internationalization of the decreasing share of US dollars in for- related to internationalization of ru-
report, where it made various short- rupee gathered steam following the eign exchange reserves of countries, pee in a granular manner and recom-
term and long-term recommendations. Reserve Bank of India’s (RBI) an- the increasing usage of other curren- mended a set of time-bound steps.
In the short-run, the members of nouncement of a mechanism to settle cies in trade invoicing, and settlement, In July last year, SBI Research,
the Group recommended enabling payments for international trade in and the emergence of various bilater- in a report, said, an interesting de-
rupee as an additional settlement rupees, especially for India’s exports. al and regional economic coopera- velopment was taking place in the
currency in existing multilateral The Reserve Bank of India (RBI) al- tion agreements. global currency market as there was
mechanisms; integrating Indian pay- lowed invoicing and payments for in- This, along with recent geopolit- a significant jump in trade in oil and
ment systems with other countries for ternational trade in Indian Rupee on ical developments, has set the stage other commodities in currencies such
cross-border transactions; inclusion July 11, 2022. for the emergence of various other as the Renminbi, Hong Kong Dollar,
of G-Secs (or government bonds) in Experts widely believe if the currencies, including the rupee, as and Arab Emirates Dirham.

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