By Shivangi Acharya
NEW DELHI (Multibagger) - In a groundbreaking move, India is considering allowing foreign investors to raise capital in rupees for investments in select countries, a government official revealed. This strategic decision is part of a larger effort to enhance the global utilization of the Indian currency.
The initiative follows Indian Finance Minister Nirmala Sitharaman's announcement in July regarding the simplification of foreign direct investment and overseas investment regulations to facilitate the use of the Indian rupee for international investments.
According to a source familiar with the plans, this new provision could open doors for investments in rupees in countries deemed of "strategic interest" to India. "The idea is to enable foreign investors from specific countries to raise capital in India in rupees for investment in their own country. This will be done on a country-to-country basis," the source informed Multibagger.
While the details of the plan are yet to be disclosed, the intention to promote the Indian rupee as a currency for overseas investments aligns with India's ongoing efforts to boost international trade settlement in its local currency and reduce dependence on the US dollar.
The finance ministry of India, currently in discussions about the plan, did not respond immediately to a request for comment via email. The official further mentioned that amendments to the Foreign Exchange Management Act will be necessary to implement the new strategy. Earlier this month, changes were introduced to this act to simplify cross-border share swaps, aiding Indian businesses in their global expansion endeavors.
Expert Analysis:
This move by India to allow foreign investors to raise capital in rupees for investments in select countries signifies a significant shift in the global financial landscape. By promoting the use of the Indian currency in international investments, India is positioning itself as a key player in the global economy. This move could potentially impact currency exchange rates, trade balances, and overall investment opportunities for both India and its partner countries. Investors should keep a close eye on how this development unfolds and consider the potential implications for their portfolios.