Bold and ambitious, India is seeking a new path to trade power by negotiating cross-border payments in the central bank digital currency (CBDC), with global central banks. The goal is to increase the potential for foreign trade with countries that do not rely on US dollar reserves.
India’s serious plans for CBDC
The Reserve Bank of India (RBI) is taking to the global stage, currently in talks with at least 18 other countries with similar visions for cross-border payments in the “digital rupee.”
Reports of these bold plans by the RBI for the central bank of India’s (CBDC) digital currency wrapped up in the Economic Times on June 27. The article cited several public statements by RBI Governor Shaktikant Das.
In one speech, delivered in London in June, Das stressed the importance of foreign trade infrastructure for the “digital rupee,” which was expected to reach one million users in the country before early July. The words sound like the promise of a new era:
“Cross-border payments will become much faster, smoother and more favorable. This is another area that needs special attention. We continue to maintain a dialogue with other central banks that have introduced or are introducing CBDCs.”
Wide range of partners and thoughtful strategy
According to the report, banks from 18 countries have already opened vostro accounts in rupees as of July 2022. In another public statement, Das explained that India wants to make CBDCs available as a payment method for importing Indian goods for countries facing a shortage of US dollars:
“There is no shortage of U.S. dollars in India, but in some import markets, trade troubles arise because of the dollar shortage.”
India’s motive for investing in the digital rupee in foreign trade transactions is also a drive to save the country’s dollar reserves:
“During the ‘taper tantrum’ era, India suddenly faced a crisis in the external sector, and the RBI had to attract foreign inflows by offering some incentives. We don’t want this situation to be repeated.”
India among leaders in CBDC development
The RBI launched a digital rupee pilot for wholesale transactions in November 2022, and for retail transactions in February 2023. Also announced in March was an agreement with the Central Bank of the United Arab Emirates to explore the potential of CBDC as a bridge for trade and remittances.
Such a revolutionary venture puts India at the forefront of change, setting new standards in the financial world. The digital Rupee, a symbol of the new era of the Indian economy, is poised to traverse the trade routes, benefiting both India and its international partners.