Internationalisation of the Rupee
Shekhar Hari Kumar () and
Ila Patnaik ()
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Shekhar Hari Kumar: National Institute of Public Finance and Policy
Working Papers from National Institute of Public Finance and Policy
The Indian Rupee currently accounts for approximately 1 percent of global foreign exchange turnover. It has a smaller market size across most trading instruments when compared to the top 8 emerging market currencies. In this paper, we evaluate the current status of the Indian Rupee as an international currency using the Chinn and Frankel (2008) framework, and explore the possibility of future Indian Rupee internationalisation. We find that the Indian Rupee has a negligible role as an official sector currency. It has some use as a reserve currency in its economic sphere of influence, but no role as an anchor or intervention currency. Private actor adoption of the Indian Rupee is much larger and more diverse than the official sector. However, this role is mostly restricted to financial flows and portfolio investment. In terms of trade invoicing and settlements in the private sector, the Indian Rupee plays a limited role due to concerns of convertibility and risk management. Given the current path of exchange control and capital account liberalisation, we anticipate gradual internationalisation of the Indian Rupee due to regional competition from the Renminbi.
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-pay
Note: Working Paper 222, 2018
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Working Paper: Internationalisation of the Rupee (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:18/222
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