Preparing students for a rupee-led global economy

When Prime Minister Narendra Modi travelled to Jakarta to sign the Comprehensive Strategic Partnership, one notable outcome was a system allowing Indian and Indonesian traders to settle bilateral trade directly in rupees and rupiah. Around the same time, India and Japan advanced discussions toward direct yen-rupee settlements. In a world shaped by geopolitical fragmentation, the global use of the rupee has moved from a long-term aspiration to an immediate policy opportunity.

The case for reducing dependence on the dollar is no longer theoretical. Sanctions on Russia have shown how access to reserves, payment systems, and international finance can be shaped by geopolitics. For most countries, the aim is not to abandon the dollar but to avoid excessive dependence on any single currency. Can the rupee become a credible currency in a multipolar world?

Over the past three years, the Reserve Bank of India has built the infrastructure for rupee-denominated trade. Since 2022, over 150 Special Rupee Vostro Accounts (SRVA) have been opened in 30 countries, facilitating local-currency trade with partners including the UAE, Indonesia, the Maldives, and Japan. India has also executed its first rupee payment for crude oil imports from the UAE. Although rupee-settled imports grew by 45%, they accounted for less than 2% of total imports. Shifting toward rupee settlement creates an offshore rupee ecosystem, lowers transaction costs, and reduces exposure to external currency shocks.

India’s opportunity lies in becoming a credible alternative to the dollar. Its democratic institutions, independent central bank, and transparent governance inspire confidence. India also enjoys a technological edge through UPI, which has international linkages with countries including Singapore, France, and the UAE, illustrating how retail adoption can complement wholesale channels to broaden currency internationalization.

However, enthusiasm must be tempered with realism. The depth of the US Treasury market, liquidity, and established invoicing conventions create powerful network effects for the dollar. Countries will hold rupees only if they have attractive avenues to deploy these balances. Deeper bond markets, broader financial instruments, and institutions such as GIFT City are essential. The rupee must be attractive not just for transactions, but as a store of value.

While critics warn that internationalising the rupee could increase exchange rate volatility, gradual mechanisms like SRVAs allow the RBI to promote trade settlement while balancing openness with macroeconomic stability. Ultimately, India cannot break its dollar dependence overnight; the goal is gradual rebalancing by expanding rupee-based trade while maintaining foreign currency reserves to absorb external shocks. The objective is to provide India’s trade and financial system with greater strategic autonomy. With market depth, institutional credibility, and tech innovation, the rupee could become a trusted global currency.

Meera Aranha, Adjunct Faculty, and Srinivas Reddy, Associate Professor, Chairperson - Placements and Corporate Engagement, TAPMI, Manipal Academy of Higher Education; Views presented are personal.