Indian Rupee Strives Towards Internationalization

Indian Rupee Strives Towards Internationalization

India has become the most populous country in the world. India is already among the 15 countries with the largest share of international trade. We have asked Syam KP, financial analyst of Gulf Brokers, about the India’s “superpower” potential and ambitions to make its rupee one of the leading international currencies.

What do you think about the future of India as an economic superpower?

According to me, India will be a superpower in the next 25 years. If you notice Indian youngsters have become the biggest asset of the global tech world which is the one reason the big tech pioneer Apple chose India over China for iPhone production. As we are talking now, Apple just opened their first Apple Store in India. So, there is no doubt that India will become an economic superpower in the next few decades.

India’s commerce secretary, Sunil Barthwal, confirmed the point that New Delhi will support international trade using the rupee. How important will the rupee be in the coming years and in the long run?

The Indian rupee is gaining global recognition and the Indian government has been working towards the internationalization of the rupee. And after many years of effort now Indian rupee is being accepted in around 20 countries. In the short term, the rupee is expected to trade sideways as the RBI surprised markets by pausing the rate hikes during its April 2023 meeting and this has led to a weakness in the rupee. However, in the long-term, I believe the internationalization of the Indian rupee will definitely help the rupee to gain further strength.

A new framework will facilitate invoicing of exports and imports in rupee, market-determined exchange rates between currency pairs of trading partners and trade settlement via Special Rupee Vostro Account. What do you think about this strategy to support the rupee in international trade?

India is one of the important trading partners to many countries in the world and using Rupee as a settlement will reduce exchange rate risks faced by these traders in the international market. India has been already exploring a rupee trade settlement mechanism with Mauritius, Malaysia, Egypt and Tanzania among others. And India already discussing ways to resolve payment issues with Russia and Sri Lanka and more countries are already considering the settlement of bilateral trade in Indian rupees. The move became successful thanks to the VOSTRO account.

Given the prospects for the rupee and the whole Indian economy is it a strong impulse for investors to come and invest in Indian assets? What kind of Indian assets do you find interesting to focus on?

Recently foreign portfolio investments in India have increased drastically as foreign investors keep buying Indian equities. And also, many of the global multinationals are opening their representative offices and production plants in India.

My first preference goes to stocks but try to diversify your portfolio: Don’t put all your eggs in one basket. Diversify your portfolio by investing in stocks from different industries and sectors.


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