Is India's 'Rupee Globalisation' Aiming to Defeat the US Dollar?

India is promoting the “globalisation of the rupee”. According to the country, this step is a primary requirement for its rapid growth.

New Delhi has repeatedly emphasised the larger goal of internationalising the rupee, encouraging its institutions to build infrastructure that enables trade and currency settlement outside the dollar-rupee pair. Shocks from oil prices and Middle Eastern currencies also provide another basis.

“This is important because India is a country with rapid economic growth compared to other countries,” said Reserve Bank of India (RBI) Governor Sanjay Malhotra at the Russian Bank Finance Congress.

“Increasing transactions in the rupee currency will help New Delhi become more isolated from currency shocks and expand its trade basket by facilitating trade with countries subject to US sanctions,” the report added, still citing Malhotra.

India itself expects rupee trade to become more common in the coming years as several countries, including some in Africa, have expressed interest in establishing payment mechanisms using the Indian currency. Previously, in September last year, Malhotra urged the Clearing Corporation of India to strengthen its offerings for retail investors in foreign exchange and government securities.

Specifically with Russia, both countries have been working to find alternative methods for conducting transactions after the method was removed from the SWIFT financial messaging system. With his Russian counterpart, Elvira Nabiullina, Malhotra said the South Asian nation’s inflation targeting has helped lower average inflation.

Meanwhile, in its March review, the Indian government maintained a retail inflation target of 4%. India’s retail inflation reached 3.93% in May, and the economy grew by 7.8% year-on-year in the quarter ending in March.