Indian Economy News & Discussion - Nov 27 2017

[vcsekhar]

Cross posting from Modi 3.0
India’s Big Push: Turning the Rupee Into a Global Currency Amid Trump’s Tariff Shock
— turning the rupee into a global trade currency. From new RBI exchange rate mechanisms and Vostro accounts abroad, to rupee settlement clauses in future trade pacts — I

I fail to see how this can happen without the rupee being a fully convertible currency. Even the RMB cannot be a trade currency as it is not fully convertible. I don't think the govt is ready to make the Rupee fully convertible without restrictions.

[A_Gupta]

Global trade currency without full convertibility? I agree, it can't happen.
However:

India has finalized currency swap arrangements with 23 countries, enabling trade in local currencies and reducing reliance on the US dollar

Out of these 23, AI claims:

These countries have agreed to or are currently using the Indian rupee for trade settlements:

Russia – Rupee trade surged post-sanctions, with Vostro accounts facilitating direct settlements
Sri Lanka – Facing forex shortages, Sri Lanka uses rupee for imports and services
Mauritius – Engaged in rupee-based trade and financial cooperation
UAE – RBI is setting direct rupee-dirham reference rates to enable smoother trade
Indonesia – Similar arrangements underway with rupiah-rupee reference rates
Germany – Among the 18 countries approved for rupee trade
Kenya – Included in RBI’s list for rupee settlement
Singapore – Active participant in rupee-based transactions
UK – Approved for rupee trade under RBI’s framework

[A_Gupta]

India’s manufacturing PMI hits 2-month high at 58.4 in Oct
https://ianslive.in/indias-manufacturin ... 1024111938

New Delhi, Oct 24 (IANS) India’s manufacturing activity showed renewed strength in October, with the HSBC Flash India Manufacturing Purchasing Managers’ Index (PMI) rising to a two-month high of 58.4, up from 57.7 in September, a report showed on Friday.

The data compiled by S&P Global indicates that the country’s manufacturing sector continues to expand at a solid pace, supported by strong domestic demand and easing cost pressures.

The rise in the manufacturing PMI reflects an improvement in business conditions, driven by higher new orders, increased production, and steady employment levels.

[vcsekhar]

These are all interesting claims. However, we import materials from Germany, Indonesia, UK and Singapore from the list below. Everything is priced in USD, GBP or Euro. Even singapore companies quote only in USD for stuff.
So maybe all this stuff is only happening in G2G deals, i have never seen any of this INR trade happening in private deals.
It would be nice to see this happen, but, i would doubt anyone taking INR without full convertibility.

Global trade currency without full convertibility? I agree, it can't happen.
However:

India has finalized currency swap arrangements with 23 countries, enabling trade in local currencies and reducing reliance on the US dollar

Out of these 23, AI claims:

These countries have agreed to or are currently using the Indian rupee for trade settlements:

Russia – Rupee trade surged post-sanctions, with Vostro accounts facilitating direct settlements
Sri Lanka – Facing forex shortages, Sri Lanka uses rupee for imports and services
Mauritius – Engaged in rupee-based trade and financial cooperation
UAE – RBI is setting direct rupee-dirham reference rates to enable smoother
Indonesia – Similar arrangements underway with rupiah-rupee reference rates
Germany – Among the 18 countries approved for rupee trade
Kenya – Included in RBI’s list for rupee settlement
Singapore – Active participant in rupee-based transactions
UK – Approved for rupee trade under RBI’s framework

[A_Gupta]

https://businessviewpointmagazine.com/r ... -accounts/

Since the introduction of RBI Rupee Accounts, India has settled transactions worth ₹1.34 lakh crore (approximately $16 billion) directly in rupees.

This is since July 2022, I think.

Baby steps.

[uddu]

https://x.com/EverythingAjay/status/1982390120801317132

@EverythingAjay
Before RBI or FM made a move…a High Court just legalizes crypto

For 5 years, crypto in India floated between commodity & currency

Now it’s officially PROPERTY

That one word changes everything

Exchanges can now be sued in civil courts, not just under IT Act offences

[uddu]

https://x.com/ShamikaRavi/status/1982306634841125332
@ShamikaRavi
This has been an open secret in the economics profession for decades. Several instances come to mind. Here’s one from the editor of an ‘A’ journal in 2009: “This is very good work, your model is neat and the empirical approach is novel. Unfortunately the data is from India, so not generalizable.”(!!)
Lesson: we need more of our own journals & thank god for open source.

https://x.com/heimbergecon/status/1981614234409550210
@heimbergecon
This paper shows that authors from low-income countries remain excluded from top-ranked economics journals and receive less attention from other economists. Developing country authors are far less likely to be published in top journals even when holding citation counts constant.

[A_Gupta]

Question - the news is that an increasing amount of India's Foreign Currency Assets are in gold and less in dollars.
But the RBI can buy gold in rupees on the domestic market. Since gold is fungible, India can build up Foreign Currency Assets domestically.
Why hasn't this been done before?

[uddu]

https://x.com/NewsAlgebraIND/status/1983572991603806674
@NewsAlgebraIND
BIG BREAKING NEWS RBI brings 64 tonnes of gold back to India from UK vaults between March and September 2025

In 1991, India had to ship out gold overnight amidst the financial crisis.

Since March 2023, a total of 274 tonnes has been repatriated to India’s vaults

Over two-thirds of RBI’s gold reserves are now stored within the country.

This move strengthens India’s financial security and reduces dependence on foreign custodians.

[uddu]

https://x.com/IMFNews/status/1984062830996549882
@IMFNews
Our new analysis in the Global Financial Stability Report reveals that in emerging economies, greater domestic ownership of local currency debt reduces the impact from global shocks, and bond yields rise less than they would otherwise amid turbulence

[Suraj]

Question - the news is that an increasing amount of India's Foreign Currency Assets are in gold and less in dollars.
But the RBI can buy gold in rupees on the domestic market. Since gold is fungible, India can build up Foreign Currency Assets domestically.
Why hasn't this been done before?

What do you see as the goal of swapping a non-inflationary item (personal gold holdings) with an inflationary one (cash) in the hands of the consumer without backing it with actual productive assets or work ?

[A_Gupta]

Question - the news is that an increasing amount of India's Foreign Currency Assets are in gold and less in dollars.
But the RBI can buy gold in rupees on the domestic market. Since gold is fungible, India can build up Foreign Currency Assets domestically.
Why hasn't this been done before?

What do you see as the goal of swapping a non-inflationary item (personal gold holdings) with an inflationary one (cash) in the hands of the consumer without backing it with actual productive assets or work ?

No goal; I was just struck that the RBI could raise "foreign reserves" without any outside-of-India trading, simply by buying gold in the domestic market. In principle, it could have done so in 1991, too, when India had that crisis.

[vera_k]

There's quite a bit of history in other countries where that has been tried.
Executive Order 6102

These days, a visit to India means you can pay for your trip by hauling back dirt cheap high quality merchandise sold in India as part of your personal baggage. Far cry from the 1991 days where India struggled to make goods that others would buy.

Aside from structural reform that allowed production, the competitive price is made possible by a devaluation of the currency similar to what happened in the other instances where governments bought gold from their population to shore up reserves.

[nandakumar]

Question - the news is that an increasing amount of India's Foreign Currency Assets are in gold and less in dollars.
But the RBI can buy gold in rupees on the domestic market. Since gold is fungible, India can build up Foreign Currency Assets domestically.
Why hasn't this been done before?

The gold currently held by the RBI is only a seventh of what it holds as foreign currency assets. And also as Suraj pointed out, it doesn't contribute readily to financing our Foreign Currency transactions for purchase of goods and services or repayment of loans (both private and government). In 1991 when financial situation was dire, we had to borrow against pledge of gold, the lenders insisted that the official gold held by RBI be physically transferred to vaults in London.
Currently our foreign liabilities are higher than foreign currency reserves plus gold.
https://rbidocs.rbi.org.in/rdocs/Wss/PD ... 49D2B9.PDF

[nandakumar]

Question - the news is that an increasing amount of India's Foreign Currency Assets are in gold and less in dollars.
But the RBI can buy gold in rupees on the domestic market. Since gold is fungible, India can build up Foreign Currency Assets domestically.
Why hasn't this been done before?

The gold currently held by the RBI is only a seventh of what it holds as foreign currency assets. And also as Suraj pointed out, it doesn't contribute readily to financing our Foreign Currency transactions for purchase of goods and services or repayment of loans (both private and government). In 1991 when financial situation was dire, we had to borrow against pledge of gold, the lenders insisted that the official gold held by RBI be physically transferred to vaults in London.
Currently our foreign liabilities are higher than foreign currency reserves plus gold.
https://rbidocs.rbi.org.in/rdocs/Wss/PD ... 49D2B9.PDF

[uddu]

Piyush Goyal on India-US deal: What's important is competitive advantage ... tariffs paid Americans
Union Minister Piyush Goyal highlights India’s robust
trade and export growth, ongoing advanced trade talks
with the EU and US, and efforts to support startups and
innovation. He also notes progress in India-China
engagement post-Galwan, with diplomatic visits and SCO
Summit discussions aiming for normalised relations,
marking an exciting phase in India’s Amritkaal journey.

[Suraj]

What do you see as the goal of swapping a non-inflationary item (personal gold holdings) with an inflationary one (cash) in the hands of the consumer without backing it with actual productive assets or work ?

No goal; I was just struck that the RBI could raise "foreign reserves" without any outside-of-India trading, simply by buying gold in the domestic market. In principle, it could have done so in 1991, too, when India had that crisis.

RBI buying domestic gold and exchanging it with currency in circulation, or just bond issuances, is not 'foreign reserves'. While the gold itself may be fungible, balance sheets are not - some of that gold will count as part of forex reserves and the rest will be domestic.

[A_Gupta]

Thanks @Suraj, @vera_k, @nandakumar!

[A_Gupta]

The Goods and Services Tax (GST) collections witnessed a 4.6% year-on-year (YoY) growth to ₹1.96 trillion in October 2025, despite the tax cuts rolled out by the central government's GST Council in September.

https://www.livemint.com/economy/indias ... 97963.html

[chetak]

[chetak]

The FTA was always bad.

A lot of Chinese stuff being rebranded in smaller ASEAN countries at discounted import duties comes to India and we got precious little in return.

Good that it’s being reviewed.

ASEAN has been stalling it for a long time.

We need way more from ASEAN than the one sided FTA allows







No wonder that youanus wants bangladesh to become a full member of ASEAN and has actively sought support from member countries like malaysia.

The beedis first applied for primary status in 2020.

The beedis aim to bridge south asia and ASEAN.

One remains doubtful if such an agenda would ever come true