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When the Rupee will become an international currency like the US Dollar?

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When the Rupee will become an international currency like the US Dollar?
posted Aug 31, 2017 by Anushka

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For rupee to become the global currency, first stage is that it should make higher exports and imports so that the currency become a popularly tradeable currency. This need the economy to develop its industrial sector (using rupee to settle trade). Stable exchange rate and deep (high turnover) foreign exchange market are important to make rupee an international currency. There is no alternative for faster growth and industrialization. The strength and weakness of the economy is actually reflected in the strength and weaknesses of its currency.

Similarly, other central banks maintaining their foreign exchange reserves in rupee denominated assets like India government bonds also is decisive to make the rupee an international currency.

Looking at these requirements, it is easy to recognize that some conditions can be met through policy measures like conditioning the Indian foreign exchange market and financial markets. But other requirements need a long term progressive performance of the economy including competitive industrial sector, increase in trade share with other countries etc.

At present, the Indian Rupee is certainly far away from any meaningful internationalization. But in the medium term future, with enhanced economic development and trade expansion, the rupee can become an international currency. Size does matter and hence there is enough potential for rupee to become an international currency. China is the largest economy, US is the second largest and India is the third largest in the world. Internationalization of a currency can get tremendous energy from big economic size. One day, the Rupee will become a hard currency; but the question is how quick it will be.

answer Sep 5, 2017 by Ritika Sharma
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