India has recently made a significant move towards reducing its dependence on the US dollar in international trade. In a trade agreement with Malaysia, India has opted to settle trade using its own currency, the Indian rupee, instead of the US dollar.
This decision was announced by the Indian Ministry of External Affairs (MEA) on Saturday, citing the initiative by the Reserve Bank of India (RBI) to facilitate the development of global trade and support the interests of the global trading community through the Indian rupee (INR). The move is expected to benefit traders on both sides, as they can now transact directly in Indian rupees and save on exchange rate differentials.
The use of the Indian rupee in the trade agreement with Malaysia deals a significant blow to the dominance of the US dollar. The US dollar has traditionally been the dominant currency in international trade, with most global transactions being settled in dollars. However, India's move could potentially encourage other countries to explore alternative currencies for international trade, thereby reducing the influence of the US dollar.
To facilitate the use of the Indian rupee in international trade, the Indian International Bank in Malaysia has operationalized a Special Rupee Vostro Account. This account acts as a platform to which Indian rupees can be transferred to and from, further promoting the use of the Indian currency in international trade.
India has also recently unveiled an updated foreign trade policy for the next five years. The new policy aims to "encourage" the widespread use of the rupee in international trade. The policy hopes to achieve $2 trillion in exports for India by 2030, making India a major player in the global market.
India's move towards reducing its dependence on the US dollar in international trade marks a significant shift in the global economic landscape. It highlights the need for countries to explore alternative currencies for international trade, promoting a more diverse and inclusive global economy.
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