Promote use of Indian rupee in international market to insulate country's economy from dollar fluctuations: SJM to govt

New Delhi: The Swadeshi Jagran Manch has urged the government to promote the use of Indian rupee in international financial markets and encourage more countries to use it as a trade currency, asserting it will help insulate the Indian economy from fluctuations in the value of dollar and boost exports.

It also urged the government to consider developing a "robust" rupee-denominated bond market, saying it will a provide businesses with a wider range of investment options and make it easier for them to raise capital in rupees.

The recommendations were made by the national council of the SJM at its two-day meeting in Pune on June 3 and June 5, its co-convenor Ashwani Mahajan said on Monday.

The SJM is an affiliate of the Rashtriya Swayamsevak Sangh (RSS), the ideological fountainhead of the ruling BJP.

Last year in July, the Reserve Bank of India (RBI) allowed settlement for import and export of goods and services in Indian rupee.

Mahajan said it was a "strategic decision" that the RBI took against the backdrop of Ukraine-Russia conflict as well as the US sanctions on the use of dollars for payments to Russia and Iran.

"Another reason was to support the weakening Indian rupee by promoting Indian exports resulting in growth in foreign trade," he said.

Mahajan said the SJM national council at its meeting hailed the RBI's decision as a “historic step” and urged the government to take steps “to further this objective”.

The council noted that many countries of the world, which were interested in importing from India and were not able to do so due to paucity of dollars, can now pay in Indian rupee for their imports, he said.

To facilitate settlement of trade in Indian rupee, Indian banks have opened "special vostro accounts" with 19 countries, including UK, New Zealand, Germany, Malaysia, Israel, Russia and United Arab Emirates, so far, he said.

"The national council of the SJM urged the government to encourage more countries to use the rupee as a trade currency," he said, adding, “India can do this by signing bilateral agreements with other countries that would allow for rupee-denominated trade”.

Mahajan said the SJM national council suggested that the government should make it easier for businesses to trade in India rupee to promote its use in the international financial markets.

"This could involve providing more liquidity in the rupee market and making it easier for businesses to open rupee accounts," he said, adding, "This could also involve encouraging foreign investors to invest in Indian rupee-denominated assets."

The national council also recommended that the government take steps to develop a robust rupee-denominated bond market to provide businesses with a wider range of investment options and make it easier for them to raise capital in rupee, Mahajan said.

Other key recommendations of the SJM council include developing a common framework for rupee-denominated trade with various countries and promoting the use of the rupee in trade with neighbouring countries, he said.

The SJM council was of the view there was no need to make any change "at this stage" in policy of restrictions on capital account convertibility as this has proved to be "a saviour in international financial crisis in the past", he added.

"By taking these steps, India can help make the rupee a more widely accepted currency for international trade, reduce India's reliance on the dollar for international trade and payments, insulate the Indian economy from fluctuations in the value of the dollar and boost India's exports,” Mahajan said.