Govt, RBI in discussion with South Asian countries for cross-border rupee trade

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said the government and the central bank are in discussion with South Asian countries to have cross-border trade in the rupee.

He also said the central bank digital currency (CBDC) is in the trial phase, and the RBI is moving very carefully and cautiously on the digital rupee launch.

After the successful launch of the wholesale pilot, the RBI on December 1, last year, began its retail CBDC pilot project.

In his keynote address at an IMF conference, Das said with the global trade outlook for 2022-23 overcast, greater intra-regional trade in the South Asian region can enhance opportunities for growth and employment.

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"At the central bank level, a key dimension for cooperation has been learning from each other on common goals and challenges... Rupee settlement of cross-border trade and CBDC, where the RBI has already started moving forward, can also be areas of greater cooperation in future," Das said.

The Governor outlined six policy priorities before the South Asian region to deal with critical challenges arising due to COVID, inflation, financial market tightening, and the Russia-Ukraine war.

"Multiple external shocks... have exerted price pressures on South Asian economies. For successful disinflation, credible monetary policy action, targeted supply-side interventions, fiscal trade policy, and administrative measures have become key instruments," Das said.

Das said while the recent softening of commodity prices and supply-side bottlenecks should help in lowering inflation going ahead, risks to growth and investment outlook may rise if inflation persists at high levels.

Prioritising price stability may be the optimal choice for the South Asian region, he added.