Internationalization of India's UPI and Rupee

Introduction

India's UPI to become international;
- Non-resident Indians will be able to transfer money using UPI.
Action plan for making Indian Rupee an international currency.

Example: US dollar used in Egypt for trade, even preferred over local currency.
International currency: used for trade in multiple countries, also known as Actively Traded Currency.
Historical context:
- Before currency: Barter system.
- Currency evolves for convenience and trust.
Trust is vital for currency value.
Real-world application:
- Trade requires a currency accepted internationally.
- British Pound was an international currency due to colonization.
- Bretton Woods agreement (1944): US dollar becomes standard.
- OPEC accepts dollar in 1973, reinforcing its status.
- Current international currencies: US Dollar, Euro, Japanese Yen, British Pound, Chinese Yuan.

India's falling forex reserves and rising dollar rates.
- RBI uses reserves to stabilize rupee.
India as a net importer:
- Higher imports than exports.
- Significant trade deficit (e.g., October trade deficit: $26.91 billion).
The need for international rupee to mitigate rising dollar value.

Positive trade data: India exports more than it imports with 154 countries.
Cooperation with countries:-
- Sri Lanka has agreed to trade in rupees.
- Russia could trade with India in rupees due to sanctions.
Benefits for countries lacking dollars or unable to trade in dollars.
Vostro account system explained:
- Allows foreign banks to hold rupee accounts for trade.
- Simplifies process: Indian exporter gets payment in rupees.
35 countries ready to trade in rupees.
Potential significant win for India.

Convincing countries like Saudi Arabia and UAE:
- Major trade surpluses with India ($12 billion with UAE, $20 billion with Saudi Arabia).
- Surplus in rupees is less useful compared to dollars.
Need for major policy changes by RBI and government:
- Reduce trade deficit by increasing exports.
- Encourage foreign investments in rupees.
Complex topic to be covered in another video.

Real-world difficulties in executing internationalization:
- Example: China’s limited success in reducing US dollar dependence since 2009.
US dollar's dominance as a weapon:
- Controlled by US FED.
- Potential sanctions could severely impact oil trade and raise dollar demand.
Importance of timely action by India.