The internationalisation of the Indian Rupees (INR) has greater ramifications including promoting exports, saving foreign currency reserves, facilitating trade with countries under sanctions and adding strength to the Indian Rupees (INR) in forex trade.
Annually, India exports around 45 million kg of tea to Russia. But because of the current war between Russia and Ukraine and the sanctions imposed by the United States and Europe, tea exports had dropped by 10 per cent between January and April compared to the same period last year. In 2019, India exported 53 million kg of tea to Iran. India could not participate in dollar-denominated trade. Hence, a rupee-rial trade mechanism was put in place in 2018.
Amid geopolitical tensions, inflation and high petroleum products, the Narendra Modi Government courageously aims for generating $450 billion or $500 billion worth of exports in 2022-23 after recording merchandise exports of $420 billion in 2021-22. The RBI’s historic decision to position INR as an international currency may benefit to build a stronger lead with the help of the operational readiness put in place toincrease exports.
India’s shipment of goods in June rose by 16.78 per cent year-on-year to $37.94 billion, slipping from 20.55 per cent growth in May 2022 and 48.34 per cent in June 2021. The trade deficit rose to $25.63 billion on account of a steep increase in gold and crude oil imports, as per the government’s preliminary data.
Assault on Dollar Hegemony
India, previously, signed deals with the UAE for rupee-based trade and now the Reserve Bank of India has a clear path to support this deal. Iran too has been looking to export to India using the Rupee. Venezuela has expressed interest.
Furthermore, parting from current provisions of the Foreign Exchange Management Act where the final payment has to be in free foreign exchange (USD, EURO etc) except for Nepal and Bhutan, now the final payment to all countries can be in INR.
The hegemony of US dollars as a currency of trade has been challenged in the past by the Euro, British pounds and yen. But, still, the US dollar controls the majority of international trade. The current sanctions by the US and EU to kick Russia out of the SWIFT system, without considering the stakes of other countries including India have impinged India to consider internationalisation of INR.
It is time to unleash the full potential of India’s Unified Payments Interface (UPI) which has been accepted in Singapore, Bhutan, UAE, Nepal and France. Addressing Digital India Week In Gandhinagar, Ashwini Vaishnav, Minister of Electronics & Information Technology, stated that India is in discussions with 30 countries for UPI.
Furthermore, NPCI is planning to promote the UPI system to 32 million NRIs. Last year, NRIs remitted $87 billion, the biggest inflow for any country tracked by the World Bank. Efficacious overseas expansions by NPCI would give India a home-grown alternative to SWIFT. Further, UPI’s association with foreign nations will increase trade, travel and remittance flows between the countries and lowers the cost of cross-border remittances
Saving Foreign Currency Reserves
Since India imports more than it exports, the country will save foreign currency by doing trade in INR. For e.g. India can pay for oil imports from Russia in INR. Further, In 2021-22, India’s trade with Russia was worth $13.1 billion. If all this trade can be done through INR-Rouble, India can save $13.1 billion as foreign currency reserves.
According to the Sri Lankan High Commission, in 2020 India was Sri Lanka’s second-largest trading partner with bilateral merchandise trade amounting to around $3.6 billion. If all this trade can be done through INR, India can save $3.6 billion as foreign currency reserves.
INR-based Global Fund
SBICAP Ventures Limited (SVL), a subsidiary of the State Bank of India recently signed an MoU with the Ministry of External Affairs for establishing the Trilateral Development Cooperation Fund (TDC Fund) for joint projects with global partners.
The TDC Fund will contribute to India’s commitment of approx. Rs.175 cr. (£17.5 million) to the Global Innovation Development Fund (GIP Fund)—anticipated to be established in association with the Foreign, Commonwealth and Development Office (FCDO) under the India—UK Global Innovation Partnership (GIP).
India, previously, signed deals with the UAE for rupee-based trade and now the Reserve Bank of India has a clear path to support this deal. Iran too has been looking to export to India using the Rupee. Venezuela has expressed interest
The GIP Fund will invest in mainly Indian MSME enterprises that are within the goals of the GIP and have successfully proven implementation of social impact innovations that can be replicated and scaled up in third countries. GIP Fund will support Indian innovators that are at an advanced phase but lack capital for expansion to other developing countries. It is highly recommended to partially or fully make such global funds INR-based especially for investing in countries from Africa and Latin America.
INR, Startup India & STPI Should Go Global
Now, the Startup India initiative should embark on global outreach by helping Indian startups go global. The Startup India initiative already has many “International bridges” like India Finland Tech Hub. Post-COVOD-19 world is looking for innovations, solutions, and entrepreneurs who can revive the economy and humanity’s survival. Now is the time to leverage India and Indian goodwill and global acceptance. Thus, the Startup India initiative should open global “handholding offices” to help Indian startups establish offices, collaborations, and partnerships.
According to the National Association of Software and Services Companies, India’s software and services exports grew from 8.1 per cent to $147 billion in the fiscal year 2020. The exports through STPI units had grown from Rs 17 crore in the financial year 1992 to Rs 5.69 lakh crore in the financial year 2022. In post-COVID-19 era, STPI should allow global entrepreneurs to establish and manage a software company digitally—from anywhere in the world—without the need for travel. E-company registration will help global entrepreneurs to hire Indian software talents and boost software exports. A complementary UPI ID and INR bank account should also be provided.
The Startup India initiative already has many “International bridges” like India Finland Tech Hub. Post- COVID-19 world is looking for innovations, solutions, and entrepreneurs who can revive the economy and humanity’s survival. Now is the time to leverage India’s and Indian’s goodwill and global acceptance
With the world economy falling into recession, COVID-19 pandemic and the Russia-Ukraine war are subverting the paradigm of the world order, Bharat and millions of Bharatiya can shape this significant re-adjustment of the world order for the furtherance of the Akhand Bharat mission.
In conclusion, I will recite the following Sanskrit shloka to every Bharatiya in India or abroad
समुत्कर्षनि:श्रेयस्यैकमुग्रं परं साधनं नाम वीरव्रतम्।
तदन्त: स्फुरत्वक्षया ध्येयनिष्ठा हृदन्त: प्रजागर्तु तीव्रानिशम्।।
(The only best means of attaining high spiritual happiness and great spiritual prosperity is to keep the spirit of fierce bravery burning (for our motherland) in us forever. May the spirit of intense and unbroken devotion (for our motherland) keep burning in our conscience.)