How Indian Currency make the International Currency in feature - Humseka

Now India's UPI is going to be International Non Residential Indians. Indians who live outside India. Now, with the help of UPI Will be able to transfer money. 2023's start can't be better than this.

But there is one more strategy and India is working in the  background on it. There's an action plan. Through which not only UPI But our Indian rupee can become international too.

Today the Indian rupee

Needs to be transformed

Needs to go international

In today's article, step by step we will understand a complex idea. That how does one currency become an international currency. And if you like this content, then do share it with your friends.

What is an International Currency?

A few days ago, we were in Egypt. And to pay the taxi fare. We were short of egyption pounds then the driver said, If you have US dollars, that's fine too. It's not about just the taxi driver. Its about every shop there.

Who were ready  to sell things to us in US dollars .In fact I think they prefer. The US dollar over their own currency.

Why so?

Because in many other countries, Like their own currency. Other currencies have some value too. 

USD is an international currency  history

That there was no currency before People used 'Barter System'

I'll grow tomatoes in my farm And if I need wheat Then I used to give my tomatoes and take wheat in return. But it had many limitations.

That's why people made currency. That piece  of paper. Whenever this paper gets exchanged. One more thing gets exchanged. And that is "trust". In that sense, even I can print. a piece of paper like that. And can put any amount on that. But the problem is that. Then only I will trust on  it. And if I trust it or not.

How does it matter?

On a currency you need. Other people to trust on it. And the more number of traders trust on it. The more value it will have. A currency has no value without trust.

Let's take that tomato and wheat example And apply it in today's world. Suppose India buys tea  from Sri Lanka. Sri Lanka buys sugar from China. 

Now Sri Lanka will accept payment in a currency which can be used in future. Which China will accept later or else Sri Lanka will just have some Gandhi pictures stored. Which they won't be able to use.

Let's  rewind a bit due to colonization in world trade, British Pound had become an international currency. And in 1944, after the Brettenwoods agreement. All major countries decided that. The US dollar will become a standard.

The world runs on oil. And in 1973, America convinced OPEC countries to accept payment in dollars. In this one moment America became a superpower Today, the US dollar, Euro, Japanese Yen, British Pound And to some extent Chinese Yuan come in the category of international currency  cies. Because apart from their own country. Other countries value their currency.

Why rupee needs to go international

You must have read it in the news. India's forex reserves have fallen to the lowest level. When the dollar's rate keeps increasing. Then the RBI, from their  reserves starts selling dollars. 

So that the supply is increased. And the rate lowers down In 2022, the RBI spent more than 40 billion dollars for keeping Rupee stable. Today the situation is that India is a net importer country. Which means overall Our imports are way more higher than our exports.

And for all these imported goods, we have to pay in dollars. Difference between this import & export is known as Trade Deficit.In the month of October only our Trade Deficit was $26.91 billion. truth is that. Our imports won't decrease And due to this in future. Dollar's price is only going to increase But there is hope.

Hope for Indian Rupee

We analyzed India's trade data of past few years. And a hopeful number came in front.

There are 154 countries with whom India's exports are more than its imports. That is a fact that. A country like China will never agree to trade in rupee. And even trying to convince them for  this is a waste. But Bangladesh can agree, Sri lanka can agree.

In fact, it has agreed too. Sri Lanka has agreed to trade with India in rupee. And both the countries benefit from this.

If Sri Lanka doesn't have dollars today. Then it can pay in  Indian rupees. Similarly, America has put sanctions on Russia. So they can't trade in dollars. Sri Lankan rupee in dollar's comparison has gone down by 84% and in comparison to Indian rupee Only 70%.

So for them, buying rupee is cheaper than buying dollars. America keeps an eye on each dollar spent outside its country too. Regulates it, controls it. So Russia started

trading with China in Yuan and after the Russia Ukraine conflict. Trade has increased between Russia & China. 

Similarly, in Russia's matter With India too. Trading in rupee can happen. By Rupee becoming international India will of course benefit But two types of countries. will benefit from it a lot. Countries like Sri Lanka. Which do not have dollars. And countries like Russia who cannot trade in dollars.

Let's understand how trade  happens in today's world? Let's assume, B is a car dealer in India. Who is importing cars from A? Who is a dealer in France? 

Now for payment, B will go to his Indian bank with his Indian rupees. Indian bank will convert it into Euros And pay  it to the foreign bank. Then the foreign bank will transfer euros to France's dealer 'A' And then the cars will be shipped from France to India.

Now this situation is going to change Now RBI has started. A special Vostro account system. Here, foreign banks can  open Indian Rupee accounts for trade. Suppose France opens a Vostro account with SBI.

Now, when the Indian dealer B Imports cars from France. He doesn't have to pay in euros. But in rupees only.

These payments are to be  done. Not in a foreign bank but India's SBI only. In this vostro account of France. Indian rupees will be deposited. Then what will they do with those rupees?

France can spend the rupees from its vostro account. On exporters in India by buying goods from them. Which means, Indian exporters will also get paid in Indian rupees only.

Which means, Indian money won't go out of India. That's the plan. There are 35 countries  today. Who are ready to trade in Rupee. If India is successful in achieving that. Then in this decade, It will be the biggest international win for India.