The Indian rupee, once widely used in sheikhdoms after India gained independence, now only accounts for less than 2% of international currency transactions. Prime Minister Narendra Modi aims to make the rupee more accessible on a global scale, following in the footsteps of other prominent currencies like the Euro and British Pound.
There are significant benefits to having a widely used currency, such as lower financing costs for domestic companies and reduced exchange-rate risks for exporters and importers. India has been laying the foundation for the rupee to become an international currency, with foreign interest in Indian government bonds and stocks on the rise.
However, India still has a long way to go compared to China, whose efforts to make the yuan a global currency have been ongoing for over a decade. Japan provides a better example, as it transformed its economy in the 1980s to elevate the yen to global currency status.
To achieve global currency status, India will need to make significant economic reforms that may disrupt its current export-oriented economic model. Without external pressure like American tariffs, the desire for change must come from within the country.
Despite the challenges, India’s efforts to make the rupee a global currency are notable. With increasing interest from foreign investors and more countries accepting rupee-denominated accounts, the rupee is slowly becoming a unit of account and medium of exchange for foreigners.
In conclusion, while making the rupee a global currency will require significant reforms and disruptions, India’s progress in attracting foreign investment and expanding the use of the rupee on a global scale is a step in the right direction. The desire for change must come from within the country, similar to how Japan transformed its economy to promote the yen as a global currency.
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