India Should Set Broader Trade Presence To Strengthen Rupee’s Status, Says Duvvuri Subbarao

Global dependence on the dollar is here to stay for now, former RBI Governor, Duvvuri Subbarao, said on the weekend. The executive said that the ‘internationalisation’ of the Indian currency still has a long way to go as the country needs to establish a much more balanced and broader trade footprint. 

Subbarao noted that if India fails to create a large trade presence, it will have to go back to ‘depending on another currency’. Regarding the American currency’s domination on the global stage, he added, “Today, we are all hostage to the dollar,” reported Business Today. 

The former RBI governor was speaking at an event in Mumbai and highlighted that there hasn’t been much progress in challenging the dollar’s position as the dominant currency in the world. He said that this status of the dollar remained despite recent efforts such as India finalising a deal with Russia for discounted oil. 

“America enjoys an exorbitant privilege because dollar is world’s reserve currency,” he pointed out. He agreed that there is increasing resentment against the US dollar due to the country’s tendency to weaponise its currency. He noted that the dollar’s dominance in the world makes more room for volatility.

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Sharing insights about his new book, he pointed out that he earlier urged the central bank to go ahead with the internationalisation of the Indian currency. He also urged the banking regulator to undertake an approach that is less interventionist in the foreign exchange market.

Referring to Prime Minister Narendra Modi’s advice that the central bank should make the Indian currency more acceptable on the global stage, he noted, “For this to happen, many factors need to align. One key step is to remove capital controls and for the RBI to adopt a more hands-off approach.”