Dollar is going to see a major slump in the world. After Saudi Arabia shifting to Chinese Yuan, 18 more countries agreed to change to Indian Rupee for trade and transaction. It will boost the rupee meanwhile dollar will see a drastic drop worldwide.
The Indian rupee is now going global as 18 countries have agreed to trade in the rupee. The world is trying to de-dollarize the international market amid a global economic slowdown and India is turning this into an opportunity. Now traders will be able to import goods from other countries by paying in rupees.
The process of SVRAs began in July 2022 when the RBI announced that it has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in Indian rupees. Special Vostro Rupee Accounts (SVRAs) are bank accounts that allow foreign banks to settle payments in Indian rupees. This is important as it will help boost India’s exports and avoid wartime international sanctions that hamper global trade flows.
The central bank, RBI, has allowed 18 countries which include Germany, Kenya, Sri Lanka, Singapore, the UK and many other countries to transact in rupee. These countries will use this money to invest in Indian companies and buy goods and services from India. It will reduce trade-related transaction costs and boost trade.
India is among the most important trading partners to many countries using Rupee as a settlement and invoicing currency, it will reduce exchange rate risks faced by these traders in the international market.
It will also reduce India’s trade deficit. India’s merchandise trade deficit, which is export minus import, was $233 bn from April 2022 to January 2023. With this, India will be able to export more as more countries are willing to trade in rupees. It will boost trade with South-Asian countries such as Nepal and Bhutan.
On top of that, it will promote the development of financial markets. The BRICS countries have already tried to de-dollarize the international market following the sanctions imposed on Russia by the Western world. That gave China the opportunity to emerge as a potential alternative to the US.