Synopsis: Former RBI governor Duvvuri Subbarao discussed the increasing global resentment towards the dollar, attributing it to America's tendency to weaponize its currency. He argued that while the internationalisation of the Indian rupee is still far off, it is essential for India to develop a balanced and broad trade footprint to avoid dependency on another currency.
He acknowledged the growing resentment against the dollar, attributing much of it to America's tendency to weaponize the currency.
Former RBI governor Duvvuri Subbarao believes the internationalisation of the Indian rupee is still a long way off, noting that India will need a more balanced and broader trade footprint.
Without this, the country "will be back depending on another currency."
"Today, we are all hostage to the dollar," he stated.
Speaking at an event in Mumbai, Subbarao mentioned that despite recent initiatives, such as India's deal with Russia for discounted oil, there has been little progress in challenging the dollar's dominance as the world's primary currency.
He highlighted the increasing resentment against the dollar, which he attributes to America's tendency to weaponize it.
Subbarao pointed out that the dollar's dominant position makes the world vulnerable to volatility, saying, "America enjoys an exorbitant privilege because the dollar is the world's reserve currency."
In a recent interaction about his new book, Subbarao mentioned that he had urged the RBI to promote the internationalisation of the rupee.
He emphasized that the central bank should adopt a less interventionist approach in the foreign exchange market.
Subbarao referred to Prime Minister Narendra Modi's advice at the RBI’s 90th-anniversary event, where Modi encouraged the central bank to make the rupee more globally acceptable.
“For this to happen, many factors need to align. One key step is to remove capital controls and for the RBI to adopt a more hands-off approach,” Subbarao, who served as RBI Governor from 2008 to 2013, told the Hindu Business Line.
For India, increasing the use of the rupee in international transactions offers significant benefits.
It mitigates exchange rate risks for Indian exporters and importers and decreases reliance on the dollar.
Additionally, it reduces the necessity for maintaining large foreign exchange reserves to manage external vulnerabilities, thereby lowering the economy's susceptibility to sudden capital reversals.
In conclusion, former RBI governor Duvvuri Subbarao underscores the urgent need for India to advance the internationalisation of the rupee to mitigate the overwhelming dependence on the dollar.
He advocates for strategic changes, such as removing capital controls and adopting a less interventionist approach in the foreign exchange market.
This shift not only promises to reduce exchange rate risks and reliance on the dollar but also aims to enhance India's economic stability by lowering the necessity for large foreign exchange reserves.
As India takes steps towards a more balanced trade footprint, these measures could pave the way for the rupee to gain greater global acceptance, thereby strengthening the nation's economic resilience.
Related Questions
1. What does former RBI governor Duvvuri Subbarao attribute to the growing resentment against the dollar?
Former RBI governor Duvvuri Subbarao attributes much of the growing resentment against the dollar to America's tendency to weaponize the currency.
2. According to Duvvuri Subbarao, what is still a long way off for the internationalisation of the Indian rupee?
Duvvuri Subbarao believes that the internationalisation of the Indian rupee is still a long way off, noting that India will need a more balanced and broader trade footprint.
3. What strategic changes does Subbarao advocate for the RBI to promote the internationalisation of the rupee?
Subbarao advocates for strategic changes such as removing capital controls and adopting a less interventionist approach in the foreign exchange market to promote the internationalisation of the rupee.
4. What benefits does increasing the use of the rupee in international transactions offer for India?
Increasing the use of the rupee in international transactions offers benefits such as mitigating exchange rate risks for Indian exporters and importers, decreasing reliance on the dollar, and reducing the necessity for maintaining large foreign exchange reserves to manage external vulnerabilities, thereby lowering the economy's susceptibility to sudden capital reversals.
5. What does Subbarao believe are the key steps required for the rupee to gain greater global acceptance?
Subbarao believes that key steps for the rupee to gain greater global acceptance include removing capital controls and for the RBI to adopt a more hands-off approach in the foreign exchange market.
.jpg)