The Reserve Bank of India's inter-departmental group constituted to look at the internationalisation of the rupee has suggested that in an increasingly polarised world, India should explore alternatives to the US dollar and the euro as strong forex reserves are not a sufficient defence against economic sanctions.
The group has proposed a host of measures to increase the acceptance of the rupee outside Indian borders. Allowing foreigners to hold rupee accounts in overseas branches is one of the ideas for the near future. Increasing the usage of UPI for cross-border payments as well as currency market trading around-the-clock have also been advised.
The working group has advised that the rupee should be included in the special drawing rights (SDRs) of the International Monetary Fund, which serve as an alternative to keeping dollar reserves and now represent the value of the dollar, euro, renminbi, yen, and British pound.
“While the Asian crisis of 1997-1998 underscored the necessity of emerging market economies having strong foreign exchange reserves to manage external shocks, in an increasingly polarised world, it no longer seems sufficient defence against the threat of economic sanctions. The IDG, therefore, feels that it is imperative for India to continue exploring alternatives to both the USD and the euro,” the group chaired by Radha Shyam Ratho said in its report.