Study on internationalization of Indian Rupee in the context of current economic scenario

Abstract

Severity of US financial crisis of 2007-2008 has led to more and more questions about US dollar as a viable international currency. The recent financial crisis has shown that many countries are dependent on the US Dollar for their economic activities and the fate of such countries are tied to that of the US Dollar. There are many predictions made about the future of international monetary system, such as emergence of China’s RMB as a reserve currency, emergence of multiple dominant currencies etc. While it is difficult to challenge the dominance of US Dollar as a reserve currency, should India try to build up Indian Rupee as a more internationalized currency? This report aims to look at various costs and benefits of internationalizing Indian Rupee and compares the Indian Rupee against various macroeconomic parameters of most internationalized currencies of the world. The paper also lists certain avenues available to India currently to push for internationalization of its currency.