The government is considering over half a dozen emerging markets with which India can trade in rupees through currency swap arrangements. This is a mechanism by which countries can trade in local currency and avoid dollar volatility.
The countries with which currency swaps are being considered are Malaysia, Thailand, Russia, Vietnam, Turkey, Bangladesh and Mexico. These are the countries with which India has two-way trade and most of them have seen their currency being battered against the dollar.
Reserve Bank of India (RBI) governor Raghuram Rajan is a believer in local currency trade. “This might be a strange time to talk about rupee internationalization, but we have to think beyond the next few months. As our trade expands, we will push for more settlement in rupees. This will also mean that we will have to open up our financial markets more for those who receive rupees to invest it back in. We intend to continue the path of steady liberalization,” Rajan had said after taking charge last week.
The logic behind such swap arrangements is that both importing and exporting countries are hurt by forex volatility.
Imports from Asean countries such as Thailand and Malaysia have jumped manifold. There has been a multi-fold surge in import of items such as air conditioners, automobile engines and auto components in the last six years which has resulted in a burgeoning current account deficit.
The countries with which currency swaps are being considered are Malaysia, Thailand, Russia, Vietnam, Turkey, Bangladesh and Mexico. These are the countries with which India has two-way trade and most of them have seen their currency being battered against the dollar.
Reserve Bank of India (RBI) governor Raghuram Rajan is a believer in local currency trade. “This might be a strange time to talk about rupee internationalization, but we have to think beyond the next few months. As our trade expands, we will push for more settlement in rupees. This will also mean that we will have to open up our financial markets more for those who receive rupees to invest it back in. We intend to continue the path of steady liberalization,” Rajan had said after taking charge last week.
The logic behind such swap arrangements is that both importing and exporting countries are hurt by forex volatility.
Imports from Asean countries such as Thailand and Malaysia have jumped manifold. There has been a multi-fold surge in import of items such as air conditioners, automobile engines and auto components in the last six years which has resulted in a burgeoning current account deficit.
No comments:
Post a Comment