According to former RBI governor Duvvuri Subbarao, the internationalisation of the Indian rupee is still a distant goal. He believes that India must develop a more diverse and balanced trade presence in order to avoid reliance on another currency.
Subbarao expressed his views at an event in Mumbai, stating that the world is currently heavily dependent on the US dollar despite recent efforts such as India’s oil deal with Russia. He noted that challenging the dollar’s supremacy as the global currency has not made much progress.
He highlighted the growing discontent with the dollar, attributing it to America’s tendency to weaponise the currency. Subbarao emphasized the vulnerability of the world to currency fluctuations due to the dollar’s dominant position as the reserve currency.
In a recent discussion about his new book, Subbarao revealed that he had advised the RBI to promote the internationalisation of the rupee. He suggested that the central bank should take a less interventionist approach in the foreign exchange market, echoing Prime Minister Narendra Modi’s call for a more globally accepted rupee at the RBI’s 90th-anniversary event.
Subbarao, who served as RBI Governor from 2008 to 2013, emphasized the need for multiple factors to align for the rupee’s internationalisation. One crucial step, he mentioned, is the removal of capital controls and a more hands-off approach by the RBI.
Expanding the use of the rupee in international transactions would bring significant advantages to India. It would reduce exchange rate risks for Indian traders, lessen dependence on the dollar, and decrease the need for maintaining large foreign exchange reserves to manage external risks. This would ultimately decrease the economy’s vulnerability to sudden capital shifts.
