Today India is celebrating its 77th Independence Day and is at the intersection of acquiring strong economic growth for its people during the next 25 years, what the government has described as India’s “Amrit Kaal”.
The value of India’s currency and its usage for global trade are among the key factors for measuring its economic stride.
During the just concluded monsoon session of Parliament, it was informed that now, banks from 22 countries have active special Rupee vostro accounts in Indian banks to trade in local currency as part of the gradual de-dollarisation plans.
The Vostro accounts allow domestic banks to present international banking services to clients who have global banking needs.
Last year, the Reserve Bank of India set up an arrangement, allowing transactions in domestic currencies to enhance the growth of global trade with the main focus being exports from India and to bring increasing attention towards the rupee.
A currency can be termed “international” if it is widely accepted worldwide as a medium of exchange. The internationalisation of the rupee gathered speed after the Reserve Bank of India’s (RBI) announcement to allow payments for international trade in rupees, especially for India’s exports. On 11 July 2022, the RBI enabled invoicing and payments for international trade in Indian Rupee.
The Indian rupee is currently trading at over 83 per US dollar, however, during the Independence, the value of the rupee was around 4.
During the economic crisis of 1991, the country was unable to pay for its imports and service its external debt obligations. India was on the brink of default, which demanded the much-needed reforms which opened the country’s economy.
In order to nullify the crisis, the Reserve Bank of India reportedly devalued the rupee in two sharp chunks – 9 per cent and 11 per cent, respectively. After the devaluation, the value of the rupee against the US dollar was around 26.
From Rs 4 during Independence against the then benchmark Pound sterling to around Rs 83 against the US dollar now, the rupee has depreciated by Rs 79 in the past 76 years.