RUPPE-VALUE

 

 

 

THAT India and Sri Lanka are mulling usage of Indian Rupee for economic transactions should make every follower of economic activity sit up and take notice. In fact, India is laying a special emphasis on such a usage of Indian Rupee for transactions with with many other countries as well, including Russia. The effort -- on part of India -- is to expand the scope of using Indian Rupee as the international currency -- not as against US Dollar per se, but as an independent, sovereign currency respected by all countries. By all standards, this is a welcome effort.

India made the experiment while purchasing crude oil from Russia during the Russia-Ukraine conflict’s early days. The arrangement was clear -- India would purchase the crude oil from Russia with Indian Rupee, and Russia would invest that money in India. Other details apart, what was most important that the intermediary US Dollar was not there in the transaction. Thus, the Indian Rupee got its due importance in a very big international transaction leaving the US Dollar aside.

India is known to have begun discussions with several countries on similar exchange-pattern. If these efforts succeed, then the Indian Rupee will have an expanded economic footprint internationally. From the point of view of economic wisdom, this move has its own importance, in the sense India will not have to pay adverse Rupee-Dollar balance when transactions involving huge amounts take place between countries. What will prevail is the difference between values of Indian Rupee and the currencies of other countries. For India, this is, of course, a dare-devil experiment -- trying to stand on its own in the international currency transactions as against the US Dollar. In other words, the Indian Rupee will have to become very strong -- backed by a sound economy that if good enough to pass the benefits of its being sound to every other country in every possible transaction. This may not happen tomorrow morning, so to say, of course. But this may start happening slowly if India takes a patient approach to establishing the primacy of Indian Rupee. That will mean India will have to start insisting upon usage of Indian Rupee as the exchange-currency in all the deals it gets into with other countries. Naturally, for this to start happening, India will have to use its diplomatic expertise to build stronger economic bonds and emerge as a strong nation in every possible manner.

Currently, US Dollar dominates most global economic transactions among all countries. What weighs upon those transactions is the dollar’s value vis-a-vis the currencies of the respective countries involved in various country-to-country deals. That means, most countries have to keep paying for those transactions as per the dollar rate.

India has been making big effort to introduce the Indian Rupee to carry through its own dealings with other countries even in non-governmental transactions. Its discussion with different countries are in various stages and a day may not be too far in the future when the Indian Rupee may start gaining an increased acceptance in international transactions between India and other countries.

The India-Sri Lanka discussions are part of that effort -- beneficial to both, without the intervention of the American Dollar. This is certainly a major leap forward by India, naturally under a suspicious gaze of the international market players including the United States. In its quest to emerge as an ever stronger economy, India has begun taking steps to increase the sovereign value of its own currency, the Indian Rupee. These efforts will certainly succeed.