New Economy Policy
De-Dollarisation
- Bangladesh and India launched the trade transaction in rupees, a step towards de-dollarization.
- De-Dollarisation refers to countries reducing their reliance on the US dollar, and advancing trade and economic reserves in their own currency or alternate resources.
- It will strengthen regional currency and trade.
- Also, both countries will gradually adopt Bangladeshi currency ‘Taka’ for trade.
- Exchange rate will be fixed in line with market demand and banks involved in the process.
About Internationalisation of the Rupee
- It is a process that involves increasing the use of the local currency in cross-border transactions.
- It involves enhancing the currency’s acceptance, liquidity, and usability in global markets.
Steps Taken to Promote International Trade Settlement in Rupees
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- In July 2022, the RBI provided an additional arrangement for invoicing, payment, and settlement of exports/imports in the rupee.
- As part of this mechanism, in December 2022, India saw its first settlement of foreign trade in rupee with Russia.
- So far banks in 19 countries including the UK, New Zealand, Germany, Malaysia, Israel, and the UAE have been permitted to make settlements in rupees.
Advantages of Internationalisation of the Rupee
- Mitigates currency risk for Indian businesses.
- Reduces the need for holding foreign exchange reserves.
- Reducing dependence on foreign currency.
