Is India ready for an international rupee? It has sent a feeler that is, perhaps, time to make rupee an international currency. Total merchandise trade of over $1 trillion a year, robust services trade, record FDI flows and currency reserves among the top-5 has created confidence in the central bank. In a sense, Indian economy has come a long way in the last 30 years since liberalization. In a recent interaction with FEDAI members, RBI deputy governor Rabi Shankar, again posed the question if it was time to shift gears on the rupee? However, now experts are veering around to the view that the time may have finally arrived. However, just a few months later, the Asian currency crisis struck and India has since given up the idea of making the Indian rupee a fully convertible currency. There were plan for full convertibility laid out in the 1997 Union Budget by P Chidambaram. In the past, Indian government has been cautious about making the rupee convertible as it could lead to a run on the currency. In other words, Indian rupee is still not a freely market determined currency but there is a lot of regulator influence.
The reason is that the Indian rupee is not yet an international currency means it is not fully convertible on the capital and current account. However, despite being among the top 5 countries in terms of GDP, India does not figure in the list of most money changers abroad.
Today if you travel abroad and look up the list of currencies with any money changer, you would find most of the hard currencies like the Dollar, Euro, Pound, Yen, Australian Dollar, Canadian Dollar, Singapore Dollar etc.
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