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Will Rupee Become As Reserve Currency: Can India’s currency rupee get the status of reserve currency? Since these days this question is being raised with great enthusiasm. Many experts of the country believe that apart from the American currency dollar, another currency in the world should get the status of reserve currency so that the supremacy of the American dollar can be challenged. Along with this, he also has control over the Nostro account.
Will rupee become reserve currency?
Recently, Kotak Mahindra Bank Chairman Uday Kotak had said that the Indian currency rupee is at the forefront of getting the status of reserve currency. He had said that European countries cannot make Euro a reserve currency because Europe is scattered. UK and Japan no longer have the capacity to make pound and yen as reserve currency. The world does not trust China, so Yuan cannot become a reserve currency. In such a situation, the Indian rupee can be the strongest contender to become the reserve currency.
According to Ambit Asset Management, China is expected to account for 15 per cent of global trade by 2020, but due to lack of trust and governance in China’s economic system, the same share in world foreign exchange reserves is less than 3 per cent. While the Indian economy is in a better position than China due to the transparency, trustworthiness and stability of the regulators. If India can become an economic superpower in the next few decades and its share in global trade increases, then the acceptability of rupee as an alternative to dollar will definitely increase.
What is De-Dollarization?
De-dollarization is the process of reducing dependence on the US currency dollar as a reserve currency. Which different countries use for trading. From crude oil to other commodities, they buy dollars to fill their foreign exchange reserves, and dollars are also used for bilateral trade. In 1920, the dollar replaced the pound sterling as the reserve currency. Japan and China are continuously moving towards de-dollarization.
Why is there talk of de-dollarization
Global tension, trade war, economic sanctions are the main reasons due to which the debate about de-dollarization is going on in the world. Russia is leading it, China, Iran, Latin American countries are supporting Russia. Russia they have offloaded 80 billion dollars. These days the supremacy of the US dollar is getting one blow after the other. The Central Banks of Russia and China are now keeping less dollar foreign exchange reserves and doing transactions in Yuan. Russia and China feel that America and its powerful currency dollar can be given the biggest challenge and America’s economic power can be hurt.
Recently, Saudi Arabia has approved to accept Yuan as currency for selling oil to China. Along with this, the price of crude oil will also be fixed in yuan, which till now has been done in dollar. India is also buying crude oil from Russia through other currency. The Latin American country Argentina has also decided that it will pay in the Chinese currency Yuan for the imports made by China. All this is being done to increase the acceptability of Chinese currency Yuan. But the screw is that most countries do not trust China due to its expansionist policies and lack of transparency.
Challenging the supremacy of the dollar
If the dollar continues to suffer a setback like this, it will be the biggest setback in the history of America because America has been using the dollar as its biggest weapon against the whole world. America occupies 20 percent of the world’s output. 60% of foreign exchange reserves held by global central banks are in dollars. The dollar gives America its greatest power on the global political and economic stage.
According to Ambit Asset Management, whatever currency will become the reserve currency after de-dollarization, its share will not be equal to the dollar. But groups with many countries can definitely have their own reserve currency, like BRICS, Quad or Gulf countries can make their own currency like Euro.
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