India and Sri Lanka decide to set aside the US dollar and trade in Rupee

New Delhi: Sri Lanka has agreed to set aside US dollars and trade in Rupee with India. Apart from Sri Lanka, other countries like Russia, Mauritius, Myanmar, Malaysia, Singapore, Israel, and Germany are also willing to trade in Rupee. More than 50 countries have opened Special Rupee Vostro Account-SRBA for transactions. This clearly indicates that Rupee is gaining acceptance as an international currency.

It was seen that the US used the dollar as a weapon after the war in Ukraine. Economists have warned of adverse consequences threatening the sustenance of the US dollar as an international currency. The International Monetary Fund highlighted this. The result of the US policy instigated countries to transact in local currencies for dealing with Russia. India also transacted with Russia in Ruble and Rupee for the fuel purchase from Russia.

Accordingly, Russian banks have opened Vostro accounts in Indian banks. Following Russia, other countries also seem to be taking swift steps to deal with India in this manner. The number of countries opening Vostro accounts has now crossed 50 and the credibility of India’s Rupee has increased tremendously. Hence claims are made that the Rupee is emerging as an international currency.

Other developed countries have shown a willingness to do business with India in rupees, previously done in US dollars. Along with the dollar, the euro was the second currency to be treated as an international reserve currency. However, using the Rupee in trade with India may change the status of bilateral trade. The Reserve Bank has taken necessary measures to facilitate rupee transactions with other countries. The Reserve Bank has provided an attractive option of investing the bilateral trade surplus in India’s government bonds. This can increase investment in India tremendously. Few renowned and credible economists have certain that the process of the Indian Rupee to be an international currency in future has already started.