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RBI's Promotion of Indian Rupee for Global Trade: Impact on USD to INR Rate?

Updated on April 04, 2023 12:00 am
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The Reserve Bank of India (RBI) recently announced that it will be promoting the use of the Indian Rupee (INR) for international trade transactions. This move is expected to have significant impacts on both the Indian and American economies.

According to a report by Times Now News, 18 countries have already agreed to trade in INR, including Japan, the UAE, the UK, and Switzerland. The Hindu Business Line reports that the RBI has granted approvals for rupee trade in 60 cases involving 18 countries. This is a significant development for India, as it reduces its dependence on the US dollar for international trade transactions.

One of the potential impacts of this move is that it will boost the value of the INR. Since there will be an increased demand for INR in international markets, its value is expected to rise. This will make imports cheaper for India, as it will not have to pay as much for goods and services denominated in foreign currencies. Additionally, it will make Indian exports more competitive, as foreign buyers will be able to purchase goods and services using INR, without having to first convert their currencies to US dollars.

Another potential impact of this move is that it could reduce the demand for the US dollar in international markets. As more countries start using other currencies, such as the INR, for international trade, the demand for the US dollar may decrease. This could lead to a decline in the value of the US dollar, which would have implications for the US economy.

The US dollar has long been the dominant currency for international trade transactions, and any shift away from it could have significant impacts on the global economy. In particular, the US economy could be affected if the value of the US dollar declines, as this could lead to higher inflation and lower purchasing power for Americans. It could also lead to a decrease in the demand for US Treasury bonds, which could make it more difficult for the US government to finance its debt.

However, it is worth noting that the shift towards using the INR for international trade is still in its early stages, and it remains to be seen how significant its impact will be. Additionally, the US dollar is likely to remain a dominant currency for the foreseeable future, given its widespread use and the stability of the US economy.

Overall, the RBI's move to promote the use of the INR for international trade transactions is a significant development for India. It has the potential to boost the value of the INR and make Indian exports more competitive, while reducing India's dependence on the US dollar. However, it also has potential implications for the US economy, particularly if the value of the US dollar declines as a result.

To compare current USD to INR rates, use our online comparison tool and compare exchange rates, fees, and more when sending money overseas from the US to India.

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How the US Dollar is Getting Stronger Against the Indian Rupee

The Indian Rupee has closed at a 20-week low against the US dollar. Paired with the unexpected outcome of the US presidential election this past week, the main reasons for dragging the rupee down can be accredited to the strike on black money via demonetization of high-value currency notes and weak industrial output. The US currency, in turn, has strengthened based on speculations that the policies of the US President-elect Donald Trump would be inflationary and lead to a rise in the interest rates, thus impacting foreign money flow to emerging countries like India.Foreign investors withdrew over Rs. 2,350 crore from the stock markets as the US-backed assets are looking more attractive and as a result, the economy is expected to improve in the coming quarters.According to India ratings, the sudden decline in money supply and a simultaneous increase in bank deposits - due to withdrawal of 500 and 1000 rupee notes - will adversely impact consumption demand in the economy. This, coupled with the depreciation of real estate, construction and informal sectors, will further weaken the rupee in the upcoming months. It is very much possible in the upcoming months, as well as even forecasted by many agencies, that US Dollars will become stronger against Indian Rupees. All this means is that the spending power of the NRIs will increase, leading to a rise in the remittance flow to India.Compare. Save. Send Money Home Wisely.TODAY'S BEST RATE USD to INRAdditional ReadingHow will India's Currency Ban Affect NRIs in the USA?How India's currency ban of Rs. 500 & Rs.1000 will affect NRIs?How much Indian Rupees can one carry to India?

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To keep yourself abreast with the latest guidelines pertaining to ODI, the Reserve Bank of India has issued detailed guidelines vide Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time, which can be accessed at RBI's website.A Master Direction that has consolidated instructions on rules and regulations framed by the Reserve Bank under various Acts including banking issues and foreign exchange transactions and is available at the 'Notification' Section on RBI's website.

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