The Reserve Bank of India (RBI) should make a conscious effort to internationalise the rupee in the backdrop of the geopolitical tensions triggering capital outflows from emerging market economies, including India, and currency depreciation, per a State Bank of India Economic Research Department Report.
SBI Group Chief Economic Adviser Soumya Kanti Ghosh stated in the ‘Ecowrap’ report, “The Russia-Ukraine war and the disruptions to payments caused by it, is a good opportunity to insist on export settlement in rupee, beginning with some of the smaller export partners.”
An “international currency,” according to the Tarapore Committee on Fuller Capital Account Convertibility (CFAC), is a currency that is widely used for international transactions, such as the US dollar, Euro, British Pound, and Swiss Franc, and Japanese Yen. A currency’s “internationalisation” is an expression of its external credibility as the economy integrates globally.
“In practice, this would imply the use of the currency for invoicing and settlement of cross-border transactions, the freedom of non-residents to hold financial assets/liabilities in that currency, and the freedom of non-residents to hold tradable balances in that currency at offshore locations,” the Committee stated. Capital controls and some degree of internationalisation can coexist.