Rupee needs a bit of a push to gain currency in cross border trade

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Apurva Dhamankar

7/26/20231 min read

The phrase "Rupee needs a bit of a push to gain currency in cross-border trade" implies that there is a need to encourage the usage of the Indian rupee (INR) in such transactions because it is not frequently utilised in such transactions.

In contrast to the nation's $1.2 trillion in total goods trade last year, India's efforts to increase the international role of the rupee through cross-border payments and promoting its use in trade settlements have so far been largely unsuccessful. Local currency trade volumes since the project started have totalled only about $120 million.

The trading of goods or services across international borders is referred to as cross-border trade. Such transactions settle payments using currencies from other nations. The US dollar, the euro, and the Japanese yen often make up the majority of trade in other countries. As a result of their stability, liquidity, and the trust they engender, these currencies are widely acknowledged by traders and investors all over the world.

On the other side, In contrast, due to worries about its volatility, convertibility, and liquidity, the Indian rupee has historically been a somewhat less common currency for international trade. The Indian government and the Reserve Bank of India (RBI) have recently implemented a number of steps to promote increased usage of the rupee in international trade. To name a few, they encourage the use of trade credit denominated in rupees, permit Indian corporations to issue bonds using a foreign currency, and set up currency exchange agreements with other nations.

According to the statement, additional promotion is still necessary for the rupee to obtain broader recognition in international trade notwithstanding these initiatives. This would entail taking further policy steps to strengthen the rupee's stability and liquidity as well as attempting to raise knowledge and confidence in the currency among international traders and investors.

Thank you.

Regards,

Garima Rai,

Kautilya, IBS Mumbai.

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