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Rupee resolve

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A rupee that can freely be exchanged for, say, dollars or Bitcoin with no caps placed or questions asked is not a decision to be taken lightly or in a knee-jerk response to economic adversity

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While the Reserve Bank of India (RBI) made a welcome move on Monday to ease external trade, a new rupee channel to resolve hitches wrought by Russia’s invasion of Ukraine is hardly a step towards a fully convertible currency, let alone a grand pitch for rupee-ruled global flows of capital. Ignore such hype. By offering legal cover to trade deals struck and paid in rupees beyond Nepal and Bhutan, RBI moved that needle only a wee bit. India’s capital clamps stay in place, and our share of global shipments is under 2%.

A rupee that can freely be exchanged for, say, dollars or Bitcoin with no caps placed or questions asked is not a decision to be taken lightly or in a knee-jerk response to economic adversity. It took a while after the East Asian currency collapse of 1997 for that idea to drop off the global checklist of market reforms, but it did. India’s half-knob clamps have not just capped the risk of capital flight and restricted it to financial markets, with caps on foreign debt calibrated by 1997 lessons learnt, they’ve found academic support too. The rupee just isn’t ready to go all-fungible under our macro conditions, though crypto loosening of curbs may call for a rethink of this resolve.

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