Recent notification issued by Reserve Bank of India for settlement of International trade in Indian Rupees to promote growth in global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR.
But we need to understand how much it will be helpful in making Indian currency stronger vis-à-vis other currencies mainly US Dollars. At this moment it is very difficult to predict its impact on currency and growth of international trade. There are certain issues related to ii like.
- Opening of Vostro account by Indian Authorized Dealer Bank in other country with their counterpart.
- Other countries willingness to trade in Indian Rupees.
- Would the big economies like US, Europe and China will accept our proposal for such arrangement?
- Will it be helpful in covering balance of payment of Indian government?
- Will this plan be limited to the under developed countries?
Understanding all these factors, it seems that development countries with big economy where our trade volume is very large, will not be interested in such arrangements. If we consider China, India has very big gap in Export and Import volume and value. Further US and European countries will not like such arrangements as they have to take care of their own currencies.
Now coming to under developed countries, they might be interested in such arrangements as they are dependent on more imports from India and instability of their own currencies.
So, in coming years we could be able to judge in better way the impact of such arrangement.
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