Modi’s push to take Indian rupee global gets off to a slow start

economictimes.indiatimes.com:

India’s year-old campaign to boost the rupee’s role in cross-border payments has made little headway, according to people familiar with the matter, underscoring the challenges for countries trying to reduce their dependence on the dollar. The Reserve Bank of India has allowed more than a dozen banks to settle trades in rupees with 18 countries since last year and is encouraging big oil exporters such as the UAE and Saudi Arabia to South Asian nations to accept the Indian currency for trade settlements.

But success has been elusive so far with total local currency trade volumes negligible at around 10 billion rupees ($120 million) since the project started, according to people familiar with the matter, who didn’t want to be named as the figures aren’t public. That compares with India’s total goods trade of $1.2 trillion in the last fiscal year.

A Finance Ministry spokesperson didn’t revert to an email seeking comment. The moves to take the rupee global are closely entwined with Prime Minister Narendra Modi’s aspirations for a bigger global heft for India as it posts one of the world’s fastest rates of economic growth and positions itself as an alternative to China in manufacturing in the post-Covid era.

While India is betting on the internationalization of the rupee to reduce dollar demand and make its economy less vulnerable to global currency shocks, some of its policies run counter to those goals. Asia’s third-biggest economy still has capital controls and maintains a tight grip on the currency, while a chronic current account deficit and a smaller share of global exports — around 2% — are other impediments.