The article discusses the evolution of the Indian rupee's international standing over the past decades, contrasting its historic presence in the global market with its current marginal role. Despite India's economic stature as the world's fifth-largest economy, the rupee accounts for less than 2% of international currency transactions. Prime Minister Narendra Modi has expressed a desire to elevate the rupee's global prominence, urging policymakers to enhance its accessibility. However, historical precedent suggests that while leaders often advocate for their currency's global recognition, enacting the necessary reforms remains a challenge.
The piece explores the potential benefits and challenges associated with establishing a currency's international prominence, drawing parallels with the experiences of other countries such as Japan and China. While India has taken strides to bolster the rupee's international appeal, notably through inclusion in global financial indices and facilitating foreign investment, significant barriers remain. The article suggests that achieving global currency status requires extensive economic reforms, akin to those undertaken by Japan in the past, which may entail considerable disruption to existing economic structures. Without internal impetus for change, the prospect of India's rupee ascending to global currency status remains uncertain, with the article underscoring the need for domestic initiative in driving such transformation.
https://www.economist.com/finance-and-economics/2024/04/04/how-to-build-a-global-currency
I think that even with strict economic reforms and the changes of economic structure, it will not result in the increase in currency recognition or more use of the rupee. The U.S. dollar is a top currency worldwide because of its ability to translate across continents similar to how english is one of the most well known and common languages of the world. I think that this is one reason to why the U.S. dollar is globally accepted.
ReplyDeleteThis is cool that this is something that we kind of get to witness happening. The examples the article uses allows us to go back and look historically and now that we have those parallels it's interesting to see how closely India will follow these predecessors. With India's economy growing, I wonder how long it will take for these changes to actually bear fruitfulness.
ReplyDeleteThis is very interesting to see. Are there any other examples of this happening with other countries in the past, and if so how did affect these countries' economies? Also, what do you think this could mean for India outside of the economic sense, do you think more people would be interested in living there for example?
ReplyDeleteI don't think that, at least in the next few years, the ruppee will have international currency recognition. Like the article mentioned, "Although Chinese policymakers have been trying to make the yuan a global currency for more than a decade, it still accounts for less than 3% of international trades made via swift, a payments network, outside the euro zone, despite the fact that China accounts for 17% of global gdp." I think this example just proves how hard it is for a currency to have international standing, and even with a high global GDP, there is a lot more external factors that play a role into a currency's standing. The article also mentioned Japan which had to tranform their whole economy to have a chance of international currency recognition. While the two countries are yet to be successful, I do think that China and Japan have a greater chance of joining the American dollar before the rupee does.
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