India is rolling out long-term steps to reduce its dependence on the US dollar as rising American tariffs pressure its currency and trade. The Reserve Bank of India (RBI) has announced fresh measures to promote the global use of the rupee, taking inspiration from China and other regional economies. However, experts believe that internationalizing the rupee will not be an easy task.
Rupee Under Pressure
The Indian rupee has been Asia’s weakest currency this year, dropping 3.6% against the dollar despite a softer greenback. This fall increases inflation risks for India, which imports most of its fuel, and also discourages foreign investors from putting money into the country.
Steps Taken by the RBI
To support trade and investment, the RBI announced new reference rates for key partners such as the UAE and Indonesia. It also widened the list of assets that overseas account holders can purchase and allowed Indian banks to lend in rupees to businesses in three neighboring countries.
RBI Governor’s Outlook
Speaking at the Economic Conclave in New Delhi, RBI Governor Sanjay Malhotra said India’s strong economic fundamentals will help the country withstand external shocks. He highlighted that India has large foreign exchange reserves, low inflation, and a manageable current account deficit, which act as buffers against risks from higher US tariffs.
Malhotra added that while global uncertainties remain, India stands as “an anchor of stability in a volatile world.” He emphasized that quick and flexible policy responses will be crucial, saying, “You can’t control the storm, but you can certainly steer the ship.”
Boost for Banking Sector
Bank stocks jumped after the RBI rolled out new measures to improve credit flow and lending. The central bank now permits banks to fund mergers and acquisitions and to lend more money to investors participating in IPOs. These steps are expected to enhance credit transmission at a time when consumer demand is slowing down.
Analysts believe that with the festive season approaching, loan growth will likely strengthen further, giving an additional push to the rally in banking stocks.
Conclusion
India is working to strengthen its currency, diversify its global trade partnerships, and boost banking sector growth. While challenges remain in making the rupee a truly international currency, the RBI’s proactive measures highlight the country’s commitment to long-term stability and resilience.
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