Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Rupee as global currency

Iran has agreed to accept 45% of payment to oil export to India in rupees. BRICS members have agreed to accept each other’s currencies. India has an opportunity to make rupee a global currency.

India can ask Saudi Arabia, Oman, Qatar and other countries to accept rupee payments for oil exports. If they refuse India can say we will stop importing oil from you and import more oil from Iran. Similarly India can have negotiations with various countries for acceptance of rupee. India can begin with SAARC and ASEAN countries. Since Russia accepts rupee payment other former USSR countries can also accept rupee payment. Canada, Australia, Japan, Germany, UK and South Korea are some of the major countries India will have to persuade. If Germany accepts rupee payment other euro zone countries will also accept rupee payment. After that it should not be difficult to persuade USA to accept rupee payments. USA gave up gold standard in 1971. In recent years it has printed additional notes valued at around one trillion dollars every year.

The government of India wants to sell bonds abroad. There is a suggestion that the sale should be in rupees because if the sale is in dollars if the rupee depreciates India will have to pay more in rupees. It is better if India does not borrow either at home or abroad. Whatever is borrowed has to be returned and not to return is immoral. Governments issue bonds and print notes to repay them and that leads to inflation.

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