The Indian rupee is one of the few currencies in the world that hasn’t registered an exponential decline in the last few months. Still, the trends are worrying, to say the least.
The opposition has already started spreading fear about it. Even the bilateral currency trade with Russia is not soothing them. Maybe they will stop it after witnessing the globalisation of the rupee.
India is globalising its rupee
According to a report by The Economic Times, the Modi government is planning to launch the Rupee in 12 more countries. India is trying to do bilateral trade through Rupee-based accounts. As expected, the internationalisation of indigenous payment systems is aimed at bypassing the West-dominated SWIFT system.
Reports suggest that Zimbabwe, Malawi, Djibouti, Ethiopia, Sudan, Madagascar, Kenya, Namibia, and Bangladesh are willing to sign Rupee-dominated trade deals.
Asif Iqbal, President of Indian Economic Trade Organization (IETO) said, “We are engaging with a group of smaller countries which may be interested in bilateral trades via dedicated rupee account. We are helping to kickstart bilateral talks after which we will make a pitch for the UPI payment system involving NPCI. Such baby steps will help the rupee gain international clout gradually through non-dollar bilateral trades.”
Understanding the significance of initiative
On the face of it, the initiative does not sound promising. After all, India’s trade with most of these countries is largely insignificant in the final analysis. Among these countries, Bangladesh is our largest trading partner, with trade worth $18.2 billion in FY22. How much is it? Well, for perspective, India’s bilateral trade with the country that owns the dollar was $157 billion during the same time. Additionally, most of these countries are located in Africa. By these parameters, it does not make sense.
But numbers are not everything in geopolitics. There is a thing called soft power. India is leveraging its soft power to test the grounds for launching a full-fledged offence against the dollar. All of these countries have two realistic options to consider. India and China. The latter of these two Asian giants has become a global pariah due to its debt trap through the Belt and Road Initiative.
On the other hand, India enjoys ultimate respect in all of these countries. It gives them funds but does not coerce them to surrender their sovereign goods.
Additionally, India is also taking them together in its development journey. It is leading almost the whole of Africa in the International Solar Alliance. It fought tooth and nail in the World Trade Organization to protect their and its own interests. India gave them vaccines when the “civilised western world” turned their back during COVID. India may not be the leader of the whole world, but it is definitely a leader of the developing world.
One giant step
These countries trust India, which is why starting rupee trade with them is not a small beginning. In addition to Rupee-dominated trade, India will incentivize them to accept UPI, RuPay, and numerous other Made-in-India financial products.
The very fact that these products are more efficient and come at a cheaper price than their western competitors is going to aid these countries in their developmental journey. Historical evidence is already there. Bajaj and TVS, two major Indian bike companies, are big hits in Africa. They are cheaper and more efficient, just like UPI.
There is no reason to believe that the miracle can’t be repeated with Rupee trade. A larger consumer base for financial products will only create a spiral effect. In it, Rupee will assist these products in gaining market share, and vice versa. Don’t be surprised if the phenomenon permeates $800 billion worth of our merchandise trade. Things change pretty quickly in these markets.
In a world where the Biden administration is thrashing currencies left, right, and centre, leaving the dollar out of the equation is the only option left for India. India is already gearing up for record gold imports. Rupee globalisation is just another feather in the cap.
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