In today’s ever-evolving world, technological advancements and shifting cultural practices are prompting the need for improved economic strategies. India has been at the forefront of this transition, experiencing significant economic growth over the past few decades. The country has made a notable shift from an agriculture-based economy to a more diversified one that places emphasis on services, manufacturing, and technology.
Economic Growth
The Indian economy has made significant strides over the past few decades, transitioning from a primarily agrarian-based economy to a more diversified one that emphasises services, manufacturing, and technology. A major factor contributing to this development has been the country’s willingness to open up to foreign investment and trade. This has been facilitated by the government implementing measures such as liberalisation of trade policies, reduction of tariffs, and improvements in infrastructure to attract foreign investors and businesses. These policies as well as technological advancements have made it easier for companies to operate in India, promoting economic growth and job creation.
The impact
The result of these improvements can be seen not only through the Indian economy but the way the Indian currency has been gaining value over the last several years. In July 2019, Gulf News reported that duty-free shops at all three terminals of Dubai International Airport and at Al Maktoum Airport had started accepting the Indian rupee. Since then, other Gulf countries, including Qatar, have also started accepting the rupee. This has been a welcome change for many Indians who frequently travel to these countries for business or leisure.
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Moreover, in March 2023, the Reserve Bank of India (RBI) authorised banks from 18 countries to open Special Vostro Rupee Accounts (SVRA) and use Indian rupees for international transactions. These 18 countries include Fiji, Botswana, Guyana, Germany, Kenya, Israel, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom. This move allows banks from these countries to use Indian currency for transactions directly, without the need for conversion to another currency.
Possible reasons
It is noteworthy that the decision was made in the backdrop of the commodities crisis that followed the commencement of the Ukraine war, with local currency trade being proposed as a remedy to wartime sanctions. During wartime, some countries might place sanctions on other countries to limit their trade and economy. To deal with such sanctions, local currency trade has been proposed as a solution. This means that countries can use their own currency for trade, rather than relying on a third currency like the US dollar, which could be affected by sanctions.Â
Future for Indian EconomyÂ
This agreement has several potential benefits for India’s economic future. Firstly, it can help to reduce the country’s dependence on other currencies, such as the US dollar and euro, for international trade and transactions. This can also help to stabilise the value of the Indian rupee and reduce the impact of currency fluctuations on the Indian economy.
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Furthermore, the use of INR in international trade can boost the demand for the Indian currency, which can lead to an increase in its value. This can help to attract foreign investment and boost India’s exports, which can contribute to economic growth and development.By opening up opportunities for businesses and individuals to use INR for international transactions, India can become a more attractive destination for foreign investors and businesses. This can help to create jobs and boost economic activity, which can further contribute to India’s economic development.
In conclusion, this is a remarkable decision that allows the use of Indian currency for international transactions and trade is a significant step towards its economic development. By reducing the need to depend on other currencies for trade, India can strengthen its economy and increase its global influence. This move also highlights the country’s efforts to become more open to foreign investment and trade, which is crucial for sustained economic growth. Overall, this decision is a positive development for India and its future prospects.