All India’s anti-US and China plans on the rupee
India wants to increase the international significance of its currency, the rupee, as China is already doing with the yuan. The analysis of Mario Lettieri, former Undersecretary of the Economy, and Paolo Raimondi, economist
India is preparing its currency, the rupee, to play a role in international markets similar to that of the yuan. Despite being an important part of the BRICS group of countries, India does not welcome Chinese expansion in Asia and does not intend to be driven by Beijing's activism.
Indian reflection starts from energy, as also reported by a document from the Gateway House Institute in Mumbai. It states in the global energy landscape that has changed over the past two decades, the only constant has been the US dollar as the currency used in energy trading. The Chinese Yuan has recently emerged to challenge the Dollar . New Delhi is now wondering whether the rupee could be a third player. A petro rupee?
INDIA PREPARING PETRO-RUPEE?
As is known, India is the world's third largest consumer and second largest energy importer. Indians complain that world oil and gas trade is conducted almost entirely in dollars on Western stock exchanges and at prices that do not represent real demand. A series of political, economic and financial factors are creating a new balance. One of them is the change in the balance of energy trade. While in the US, Europe and Japan oil consumption is declining or stabilizing, in India, with its growing economy, energy consumption is increasing. In fact, it is expected that the need will increase from the current 4 million barrels per day to 10 million by 2040.
It is also pointed out that the two global oil benchmarks, WTI and Brent, are outdated and often manipulated. Today the two major importers, China and India, refer to totally different producers and markets. It is implicit that the new orientation is going to undermine ancient positions of western privilege or, better to say, of the old colonialism.
ATTACK ON THE DOLLAR
India argues that the 2008 crisis called into question the role of the dollar as the single global currency and that its instability would have doubled the US debt, prompting Washington to retreat from globalization processes. It is noted that the unilateral and geopolitically motivated sanctions would have aroused strong resentments against American power. According to the aforementioned study, the process of the EU and the euro, which would have contented itself with controlling 20% of monetary and commercial exchanges and world reserves, has come to a halt.
New Delhi is aware that on the two main markets, that of New York and that of London, the vast majority of financial transactions, futures and other derivatives relating to energy, are of a purely speculative nature. Futures contracts are at least 10 times the volume of oil actually traded. According to Indian experts, financial speculation would also dominate the Shanghai market, created in 2018. Furthermore,
INDIA'S RESPONSE TO CHINA
New Delhi sees that China, through the Asian Infrastructure Development Bank and the Belt and Road Initiative, the new Silk Road, would be penetrating many countries in Asia, the Indian Ocean and other continents. He would also like to influence the global financial architecture with the yuan. Hence the action for the internationalization of the rupee through the creation of a hub for a new international oil and gas market, eventually linked to the Mumbai stock exchanges. Thus the Indian government could bring its weight to bear on energy price formation.
The Reserve Bank of India has authorized Indian banks to trade rupees in 60 commercial contracts involving 18 states, including Britain and Germany. With Malaysia, this mechanism is already at a more advanced stage. New steps towards the internationalization of the rupee will be announced at the forthcoming G20 summit in New Delhi.
Europe cannot be indifferent to changes in the global scenario and should also relate better to the new emerging superpower. Woe, however, to think of India playing against China: it would be the usual short-sighted and losing policy.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/india-internazionalizzazione-rupia/ on Sun, 23 Apr 2023 05:13:24 +0000.