India’s economy is constantly getting stronger and its impact is now being felt in international trade. The three special decisions taken by the Reserve Bank of India (RBI) are expected to increase the global dominance of the Indian rupee. After the RBI’s three -day Monetary Policy Committee meeting, Governor Sanjay Malhotra has targeted to reduce dependence on foreign currency through these steps, which will give a new dimension to the country’s Mudra policy and global trade relations.
What are the three important steps of RBI
The first step is that transparent reference rates will be fixed for the currencies of India’s big business partner countries. This will increase transparency and trust in the transaction of rupee, and traders will encourage to do business in rupees without any doubt.
The second major step is to promote investment in Indian rupee in corporate bonds and commercial papers ‘Special Rupee Waughtro Account (SRVA)’. Through this account, foreign banks will be able to settle the trade directly with Indian banks in the rupee directly. This will not only reduce the dependence on US dollar, but will also protect the economy from the risk of exchange rate and currency crisis.
The third decision is that the authorized Indian banks will now be able to give loans in Indian rupees for bilateral trade to migrant citizens of Bhutan, Nepal and Sri Lanka. This initiative is a big step towards strengthening the Indian rupee internationally, along with strengthening economic relations with small neighboring countries.
Increasing credibility of rupee and impact on economy
These decisions will directly affect the country’s monetary status and current account deficit. When the dependence on foreign exchange decreases, the current account deficit will be under control and the country’s economy will remain strong in front of external shocks. According to RBI, India’s external region is now stronger than ever and the bank is ready to take appropriate steps if needed.
Governor Sanjay Malhotra has increased the country’s GDP from 6.5% to 6.8%, while inflation is expected to be 2.6% to 4.5% in the upcoming quarters. This is a positive sign for India in terms of economic stability and development.