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August 13th Current Affairs

Home / UPSC / Current affairs / UPSC Current Affairs – August 13th

Table of Contents

31-Member Parliamentary Panel to Review FCRA Amendment Bill

The Foreign Contribution (Regulation) Amendment Bill, 2026 has been referred to a 31-member Joint Parliamentary Committee (JPC) for detailed examination. The decision was taken by both Houses on 12 August 2026 amid strong Opposition objections.

What is the FCRA?

FCRA = Foreign Contribution (Regulation) Act

The FCRA regulates the acceptance and utilisation of foreign contributions by individuals, associations and organisations in India.

Its broad objectives are:

  • Prevent misuse of foreign funds.
  • Ensure transparency and accountability in foreign contributions.
  • Protect national interest and prevent foreign funding from being used for activities contrary to Indian law.

The present law is the FCRA, 2010, which replaced the FCRA, 1976.

Why has the 2026 Amendment Bill been introduced?

The Bill seeks to strengthen government oversight over foreign contributions and, importantly, proposes a new mechanism for dealing with assets created using foreign contributions when an organisation loses or fails to renew its FCRA registration.

Major proposal: Designated Authority

The Bill proposes creation of a Designated Authority, appointed by the Central Government.

If an organisation’s FCRA certificate:

  • expires,
  • is cancelled,
  • is surrendered, or
  • is not renewed,

the foreign contribution and certain assets may provisionally vest with the Designated Authority.

If the organisation does not obtain/renew/restore its registration within the prescribed period, the assets may permanently vest with the authority and may subsequently be transferred or disposed of according to the proposed framework.

What about places of worship?

The Bill contains a specific provision for places of worship. Where such an asset is involved, it is to be regulated in a manner intended to preserve its religious character.

Why was it sent to a JPC?

The Bill has generated considerable debate.

Government’s argument

The government argues that the amendments are intended to:

  • strengthen regulation of foreign funds;
  • improve transparency and accountability;
  • prevent misuse of foreign contributions;
  • provide a mechanism for managing assets created from foreign contributions when FCRA registration ceases.

The government has rejected the allegation that the Bill specifically targets minorities.

Opposition’s concerns

Opposition parties have argued that some provisions could have a significant impact on:

  • NGOs,
  • charitable organisations,
  • religious institutions,
  • minority organisations and
  • civil society groups receiving foreign contributions.

They have particularly raised concerns about the powers proposed for the Designated Authority.

Therefore, referral to the JPC allows the proposed law to undergo detailed clause-by-clause examination and wider parliamentary scrutiny.

A Parliamentary Standing Committee on Rural Development and Panchayati Raj has highlighted a major gap between skill training and actual employment under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY).

According to the latest figures, 18.38 lakh candidates had been trained under DDU-GKY by March 2026, but only about 11.94 lakh (around 65%) had been placed. The committee has called for stronger industry linkages and better tracking of candidates after training.

What is a Joint Parliamentary Committee (JPC)?

A JPC is an ad hoc parliamentary committee constituted to examine a specific Bill or issue in detail.

Composition of the FCRA JPC

House

Members

Lok Sabha

21          

Rajya Sabha

10

Total

31

The Lok Sabha Speaker will nominate the 21 Lok Sabha members, while the Rajya Sabha Chairman will nominate the 10 Rajya Sabha members.

The committee has been asked to submit its report to the Lok Sabha by the last day of the first week of the Winter Session of Parliament, 2026.

Functions of a JPC

A JPC can:                     

  • examine the provisions of a Bill in detail;
  • seek information and documents;
  • hear views of experts and stakeholders;
  • examine government officials and other relevant persons;
  • suggest modifications and recommendations.

Important point: A JPC’s recommendations are not automatically binding on the government. The final decision regarding legislation remains with Parliament.

FCRA: Background

  1. FCRA 1976

    • Enacted during the Emergency period.
    • Regulated foreign contributions and foreign hospitality.

    FCRA 2010        

    • Replaced the 1976 Act.
    • Introduced time-bound FCRA registration, generally requiring renewal every five years.
    • Strengthened regulation of foreign contributions.

    FCRA Amendment, 2020

    Important changes included:

    • Reduction of the administrative-expense limit from 50% to 20%.
    • Prohibition on transfer of foreign contribution to another FCRA-registered person/organisation.
    • Introduction of Aadhaar as an identification document for certain office-bearers, subject to the law’s provisions.
    • Greater government oversight.

Charges Against Justice Varma ‘Proved’” — Lok Sabha Panel Findings

The Lok Sabha Speaker-appointed inquiry committee has found that the three charges against Justice Yashwant Varma stand proved in connection with the discovery of unaccounted currency at his official residence in Delhi. The development is important for UPSC because it involves judicial accountability, removal of judges, parliamentary procedure and separation of powers.

What is the Justice Varma case?

In March 2025, a fire occurred at the official residence of Justice Yashwant Varma, who was then a judge of the Delhi High Court. During firefighting operations, bundles of partly burnt currency notes were reportedly found at the premises.

The controversy led to an in-house inquiry within the judiciary. The matter subsequently moved into the parliamentary process for possible removal of the judge.

The Supreme Court had earlier upheld the legality of the in-house inquiry and rejected Justice Varma’s challenge to the process.

What has the latest parliamentary inquiry found?

The committee constituted by Lok Sabha Speaker Om Birla examined the allegations and concluded that all three charges were proved.

The three charges         

  1. Unexplained cash at the official residence
    The committee found the presence of currency at the residence to be established, while Justice Varma failed to satisfactorily explain its presence, source and ownership.
  2. Disturbance/tampering of material evidence
    The committee also found that material connected with the incident had been disturbed or affected, constituting a serious concern regarding the evidence.
  3. Evasive explanation
    The committee found Justice Varma’s explanations regarding the cash and circumstances surrounding its discovery to be evasive and unsatisfactory.

Why is this important?

This case directly connects with the constitutional mechanism for removal of judges.

Constitutional provisions

For Supreme Court judges:

Article 124(4) provides for removal on the ground of:

“proved misbehaviour or incapacity”

For High Court judges:

Article 217 deals with appointment and conditions of office, while Article 218 makes the removal procedure under Article 124(4) applicable to High Court judges as well.

Therefore:            

High Court Judge → Article 217 + Article 218 → Removal procedure under Article 124(4)

How can a High Court judge be removed?

A High Court judge cannot be removed simply by the President or the Chief Justice of India.

The constitutional procedure involves Parliament.

Procedure in simple steps:

  1. Notice for removal motion
    Members of either House of Parliament initiate the process.
  2. Inquiry Committee
    Under the Judges (Inquiry) Act, 1968, a three-member committee investigates the allegations.
  3. Committee report
    If the committee finds misbehaviour or incapacity proved, its report goes to Parliament.
  4. Parliamentary consideration
    The removal motion must be passed by both Houses of Parliament.

The required majority is:        

  • Majority of the total membership of that House, AND
  • Two-thirds of members present and voting
  1. President’s order
    After both Houses pass the motion with the required special majority, the President issues the order of removal.

Remember:

Inquiry Committee → Lok Sabha → Rajya Sabha → President → Removal

 

Important distinction: “Proved” does NOT mean immediate removal

Even though the inquiry committee has concluded that the charges are proved, Justice Varma is not automatically removed from office merely because of the committee report.

The constitutional parliamentary process must still be completed.

The latest reporting also notes uncertainty over whether the removal motion will actually proceed, particularly because of the political and procedural circumstances surrounding the case.

Why is judicial accountability important?

The Indian Constitution provides judges with a high degree of security of tenure.

This is intended to protect:

  • Judicial independence
  • Freedom from political pressure
  • Impartial decision-making
  • Rule of law

However, judicial independence must be balanced with judicial accountability.

The dilemma:                

Too little accountability → possibility of misconduct going unchecked.

Too much executive/parliamentary interference → threat to judicial independence.

Therefore, India’s constitutional system attempts to maintain a balance between independence and accountability.

Role of the Judges (Inquiry) Act, 1968

The Judges (Inquiry) Act, 1968 provides the statutory framework for investigating allegations of misbehaviour or incapacity against judges of the Supreme Court and High Courts.

The Act is important because Parliament cannot simply remove a judge based on an allegation.

There must be an inquiry into the allegations and the constitutional removal procedure must be followed.

A Timely Reset for the Food Security Act

The editorial discusses the draft National Food Security (Amendment) Bill, 2026, which proposes changes to the Antyodaya Anna Yojana (AAY) entitlement under the National Food Security Act (NFSA), 2013. The larger question is whether India’s food-security policy should move from simply ensuring calorie security through cereals towards broader nutrition security.

What is the National Food Security Act, 2013?

The NFSA, 2013 transformed foodgrain distribution from primarily a welfare programme into a legal entitlement.

It provides coverage of up to:

  • 75% of the rural population
  • 50% of the urban population

There are two major beneficiary categories:

Priority Households (PHH)

  • Entitled to 5 kg of foodgrains per person per month.

Antyodaya Anna Yojana (AAY)

  • Intended for the poorest of the poor.
  • Currently entitled to 35 kg of foodgrains per household per month, irrespective of household size.

What is the problem with the existing AAY system?

The major issue is the flat 35-kg household entitlement.

Consider two AAY households:

Household A: 2 members
→ 35 kg ÷ 2 = 17.5 kg/person

Household B: 7 members
→ 35 kg ÷ 7 = 5 kg/person

Thus, as household size increases, foodgrain availability per person decreases.

This creates an unintended inequity within the AAY category

What does the proposed amendment seek to do?

The draft amendment proposes a per-person formula:

7 kg per person, subject to a maximum of 35 kg per household.

For example:          

Household size

Proposed entitlement

1 member

7 kg

2 members

14 kg

3 members

21 kg

4 members

28 kg          

5 members

35 kg

6 members

35 kg

7 members

35 kg

So, the proposal attempts to correct the disadvantage faced by larger AAY households.

However, the editorial points out an important problem: smaller AAY households could actually lose part of their existing 35-kg entitlement.

Why is this controversial?

The key criticism is that the proposal may correct inequality by reducing benefits for some beneficiaries rather than increasing support for those who receive less per person.

Example:

A 2-member AAY family currently gets:

35 kg                   

Under the proposed formula:

2 × 7 = 14 kg

That means a 60% reduction.

Similarly, a 4-member household would receive:

4 × 7 = 28 kg

instead of 35 kg.

Therefore, the editorial argues that the reform should ideally protect the existing entitlement while addressing the needs of larger households.

Tamil Nadu example

The editorial uses Tamil Nadu to demonstrate the potential impact.

According to the discussion, Tamil Nadu has around 18.64 lakh AAY households, of which approximately 15.75 lakh (84.5%) have fewer than five members.

Consequently, the proposed formula could substantially reduce the State’s monthly AAY allocation:

65,261 tonnes → 42,040 tonnes

This represents a reduction of roughly 35.6%.

UPSC significance 

This highlights the importance of examining a welfare reform not only through its formula, but also through its actual impact on vulnerable households.

Bigger problem: India's NFSA coverage is outdated

Another major concern is the beneficiary ceiling.

The NFSA’s population coverage is based on data from the 2011 Census.

The ceiling is approximately:

81.35 crore beneficiaries

But India’s population has increased considerably since 2011.

The editorial notes that against an estimated population of around 146.4 crore in 2025, the existing ceiling corresponds to only about 55.6% of the population.

Therefore:                                    

Census 2011 → outdated beneficiary ceiling → possible exclusion of eligible people

The editorial suggests that the beneficiary ceiling should be recalculated using updated population data, particularly when Census 2027 data become available.

Food security ≠ Nutrition security

Food security traditionally focuses on ensuring that people have enough food.

But nutrition security goes beyond quantity.

It asks:

Is the food sufficiently diverse, nutritious and healthy?

India has made progress in reducing some forms of undernutrition, but simultaneously faces a growing burden of non-communicable diseases (NCDs) such as diabetes.

The editorial therefore argues for moving from:

“Calorie security” → “Nutrition security”

India's nutritional paradox

India faces a double burden of malnutrition:

Undernutrition

  • Stunting
  • Wasting
  • Underweight
  • Micronutrient deficiencies

Overnutrition / lifestyle-related diseases

  • Diabetes
  • Obesity
  • Cardiovascular diseases

The editorial cites NFHS-6 findings showing improvement in stunting, but much smaller changes in wasting and underweight. It also highlights the low proportion of young children receiving a minimum acceptable diet.

At the same time, India has a very large diabetes burden.

According to the ICMR-India Diabetes study cited in the editorial:

  • 101 million people had diabetes.
  • 136 million had prediabetes in 2021.

Should millets replace rice and wheat?

Not necessarily.

Millets are nutritious and can contribute to dietary diversification, but simply replacing one cereal with another does not automatically solve nutritional problems.

If the overall diet remains excessively carbohydrate-heavy, the underlying problem remains.

Therefore, the solution should include:

  • Pulses
  • Vegetables
  • Fruits
  • Milk and dairy
  • Nuts
  • Healthy oils
  • Whole grains/millets
  • Adequate protein

The ICMR-NIN 2024 dietary guidelines recommend that cereals and millets together should provide no more than 45% of dietary energy.

Great Nicobar Island: Tribal Council Says Its Concerns Are Being Overlooked

The Great Nicobar Island (GNI) Development Project is once again in the news because members of the Nicobar Tribal Council have raised concerns that their views and interests are not being adequately considered in the implementation of the mega infrastructure project. The issue brings together tribal rights, environmental protection, strategic security and sustainable development. Recent reporting has also highlighted disputes over tribal consent and land.

What is the Great Nicobar Project?

The project is officially known as the Holistic Development of Great Nicobar Island.

It is a large infrastructure and development project involving:

  • International Container Transshipment Terminal (ICTT) at Galathea Bay
  • Greenfield international airport
  • Power-generation facility
  • Township and associated infrastructure

The government describes it as a strategically important project intended to strengthen India’s presence in the Indian Ocean Region and Indo-Pacific while creating a major maritime and economic hub.

The project has been estimated in different official and public accounts at around ₹72,000 crore initially, with later estimates/revisions around ₹90,000 crore or more. Therefore, for UPSC, it is safer to describe it as a mega infrastructure project rather than memorising one cost figure.

Why is Great Nicobar strategically important?

Great Nicobar is India’s southernmost major island in the Andaman and Nicobar archipelago.

It lies close to the Strait of Malacca, one of the world’s most important maritime chokepoints.

Strategic importance

The location provides India with:

  • Better surveillance of important maritime routes.
  • Greater presence in the eastern Indian Ocean.
  • Strategic connectivity towards Southeast Asia.
  • Potential to strengthen India’s maritime logistics.
  • A stronger position in the Indo-Pacific.

The Strait of Malacca carries a very large share of global maritime trade, making Great Nicobar strategically valuable for India’s maritime security.

Why are tribal groups concerned?

Great Nicobar is home to indigenous communities, particularly:

Shompen                                  

  • Classified as a Particularly Vulnerable Tribal Group (PVTG).
  • Traditionally dependent on forests for hunting and gathering.
  • Maintain relatively limited interaction with the outside world.

Nicobarese

  • Indigenous community with more established settlements and interaction with the wider society.

The central concern is that large-scale infrastructure development could affect:

  • Traditional land and forest use.
  • Community livelihoods.
  • Cultural practices.
  • Access to ancestral areas.
  • Ecological resources on which tribal communities depend.

Recent reports have described allegations by tribal leaders that they were pressured to sign documents relating to surrender of tribal land.

The major issue: Tribal consent

The question is not simply:

“Has the government obtained a document showing consent?”

The deeper question is:

“Was the consent free, informed, collective and obtained through a legally valid process?”

The Nicobar Tribal Council has raised concerns regarding the manner in which tribal consent and land-related decisions have been handled.

This has led to a larger debate over participatory development and indigenous rights.

Why is the Forest Rights Act important?

The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, commonly called the Forest Rights Act (FRA), recognises certain traditional rights of forest-dwelling Scheduled Tribes and other traditional forest dwellers.

Important rights include:                              

  • Individual forest rights.
  • Community forest rights.
  • Rights over minor forest produce.
  • Rights to traditional use of forest resources.
  • Community rights over forest resources.

The Great Nicobar debate therefore raises questions about whether tribal and community rights have been adequately recognised before diversion of forest land.

Legal challenges have specifically questioned whether the project’s procedures adequately comply with the Forest Rights Act and tribal-consent requirements.

What is the Andaman and Nicobar Islands (Protection of Aboriginal Tribes) Regulation, 1956?

This is another important Prelims fact.

The Andaman and Nicobar Islands (Protection of Aboriginal Tribes) Regulation, 1956 (ANPATR) provides special protection to indigenous tribal communities of the islands.

It regulates matters such as:

  • Entry into tribal areas.
  • Contact with protected tribes.
  • Protection of tribal interests and areas.

Therefore, tribal protection in the Andaman & Nicobar Islands involves a special legal framework in addition to broader tribal and forest-rights laws.

Environmental concerns

Great Nicobar is not an ordinary development site.

It is an extremely ecologically sensitive island ecosystem.

Concerns include:

Tropical forests        

Large areas of forest would be affected by infrastructure development.

Leatherback turtles

Galathea Bay is an important nesting area for the leatherback sea turtle, the world’s largest living turtle.

Nicobar megapode

The island supports the Nicobar megapode, an endemic bird species.

Coral reefs and coastal ecosystems

Construction of a large port can affect:

  • Coral reefs
  • Mangroves
  • Coastal habitats
  • Marine biodiversity

Disaster vulnerability

The Andaman & Nicobar region is located in a seismically active zone and was severely affected by the 2004 Indian Ocean tsunami.

Therefore, environmentalists have questioned whether large coastal infrastructure is compatible with the island’s ecological and disaster vulnerability.

Government's argument

The government maintains that the project has strategic, economic and developmental importance.

It argues that the project can:

  • Improve India’s maritime connectivity.
  • Develop transshipment capacity.
  • Reduce dependence on foreign transshipment hubs.
  • Generate employment and economic activity.
  • Strengthen India’s strategic presence near the Malacca Strait.
  • Improve infrastructure in the Andaman & Nicobar Islands.

The government has also emphasised that environmental safeguards and protection of indigenous communities are incorporated into the project framework.

The central dilemma: Development vs Environment?

The better approach is:       

Strategic development + ecological sustainability + tribal rights

India has legitimate strategic interests in the Andaman & Nicobar Islands.

At the same time, development in an ecologically fragile region containing PVTGs and endemic biodiversity requires a much higher standard of environmental and social safeguards.

Therefore, the principle should be:           

“Development without dispossession and conservation without exclusion.”

Why is this important for India's PVTGs?

The Shompen are particularly important from the UPSC perspective because they are a PVTG.

PVTGs are characterised by factors such as:

  • Pre-agricultural level of technology.
  • Stagnant or declining population.
  • Extremely low literacy.
  • Subsistence-level economy.
  • Relative vulnerability to external social and economic changes.

Infrastructure projects affecting PVTGs therefore require special sensitivity because displacement or disruption of their ecological environment can threaten not only their livelihood but also their culture and social survival.

Constitutional and legal dimensions

The issue can be connected with:

Article 21

Right to life has been judicially interpreted to include aspects of a clean and healthy environment.

Article 46

Directs the State to promote the educational and economic interests of weaker sections, particularly Scheduled Tribes, and protect them from exploitation.

Fifth/Sixth Schedules

These provide special governance arrangements for Scheduled Areas and tribal areas, although the Andaman & Nicobar Islands are not governed through the Fifth or Sixth Schedule in the same manner as mainland Scheduled Areas.

Forest Rights Act, 2006

Recognition of forest rights and community rights.

ANPATR, 1956                                                           

Special protection for indigenous tribes of the Andaman & Nicobar Islands.

What should be the way forward?

  1. Genuine tribal consultation

Consent should be free, informed and meaningful, not merely procedural.

  1. Protect PVTGs

Special protection should be provided to the Shompen and other vulnerable indigenous communities.

  1. Independent environmental assessment

Environmental impact assessments should consider cumulative and long-term impacts, not only individual components.

  1. Disaster-resilient planning

The project’s location in a seismically and tsunami-prone region must be incorporated into infrastructure planning.

  1. Transparent rehabilitation policy

If relocation becomes unavoidable, affected communities must have a meaningful role in determining rehabilitation and livelihood restoration.

  1. Balance strategic interests with ecological limits

National security should be strengthened without treating environmental and tribal safeguards as obstacles to development.

Panel asks Government if it will push agenda for De-dollarisation

A Parliamentary Standing Committee on External Affairs has asked the government whether India plans to promote a de-dollarisation agenda at the 18th BRICS Summit, which India is scheduled to host in September 2026. The issue is significant because India is currently holding the BRICS chairship and therefore has an important role in shaping the summit’s agenda.

What is De-dollarisation?

De-dollarisation means reducing dependence on the US dollar in:

  • International trade and payments
  • Cross-border settlements
  • Foreign-exchange reserves
  • International borrowing and financial transactions

It does not necessarily mean completely abandoning the US dollar.

For example, two countries may settle their bilateral trade directly in their own currencies instead of first converting their currencies into dollars.

Simple example            

Suppose:

India imports from Russia

Traditional route:

Rupee → US Dollar → Rouble

Alternative route:

Rupee → Rouble

The second arrangement can reduce dependence on the dollar.

Why has the Parliamentary Committee raised the issue?

The committee has asked whether India, as the 2026 BRICS chair, intends to push a BRICS-led de-dollarisation agenda at the upcoming summit.

The question reflects a larger debate:

Should India actively promote alternatives to the dollar, or should it focus on internationalising the rupee without directly challenging the dollar?

This distinction is extremely important for UPSC.

India has been promoting greater international use of the Indian rupee, but this is not the same as formally seeking to replace the dollar as the world’s dominant reserve currency.

Why is the US dollar so dominant?

The dollar has a central role in the international financial system because of:

  1. Reserve currency status

Central banks hold significant amounts of US dollars as part of their foreign-exchange reserves.

  1. International trade

Many commodities and international contracts are traditionally denominated in dollars.

  1. Financial markets

The US has deep and highly liquid financial markets.

  1. Network effect

Because most countries and institutions already use the dollar, others have an incentive to continue using it.

  1. Trust and convertibility

The dollar is widely accepted and easily convertible into other currencies.

Therefore, replacing the dollar is much more difficult than simply creating an alternative currency.

Why are countries interested in reducing dollar dependence?

There are several reasons.

  1. Sanctions vulnerability

The US dollar-based financial system gives the US considerable financial leverage.

Countries facing sanctions may therefore seek alternative payment mechanisms.

  1. Financial sovereignty

Countries want greater control over their international payments and monetary policy.

  1. Exchange-rate risk

If trade is conducted in local currencies, countries may reduce their dependence on dollar fluctuations.

  1. Transaction costs

Direct bilateral currency settlement can sometimes reduce the cost associated with converting currencies through the dollar.

  1. Geopolitical diversification

Emerging economies increasingly want a more multipolar international financial system.

What is India's position?

India’s approach is better described as:

“Diversification and rupee internationalisation” rather than an aggressive anti-dollar policy.

India has been encouraging the use of the rupee in international trade settlements.

India has also established mechanisms for rupee-based trade with several countries.

External Affairs Minister S. Jaishankar has previously clarified that India does not have a policy of replacing the US dollar as the global reserve currency. He has simultaneously supported greater internationalisation of the rupee.

So remember:             

India wants greater use of the rupee, but this does not automatically mean India wants to eliminate the dollar.



Rupee Internationalisation vs De-dollarisation

 

Rupee Internationalisation

De-dollarisation

Expanding use of ₹ internationally

Reducing dependence on $

Promotes rupee trade settlement

Promotes alternative currencies/payment systems

Allows foreigners to hold/use rupees

May involve replacing dollar in trade/reserves

India’s major objective

Broader global financial trend

Not necessarily anti-dollar

Directly reduces dollar usage

Easy way to remember:

Internationalisation of ₹ = Make the rupee more global

De-dollarisation = Make the global system less dependent on the dollar

What role does BRICS play?

BRICS is important because its members represent a significant share of the world’s population and economy.

The grouping has discussed:

  • Local-currency trade
  • Cross-border payment mechanisms
  • Greater use of national currencies
  • Financial cooperation
  • Alternatives to excessive dependence on existing financial infrastructure

However, BRICS does not have a unified position on completely replacing the US dollar.

India has historically taken a relatively cautious position, preferring practical mechanisms for trade settlement rather than immediately creating a common BRICS currency. Jaishankar has also said that there is no unified BRICS position on de-dollarisation.

Does BRICS have a common currency?

No.

This is a very important Prelims trap.

There is currently no common BRICS currency comparable to the euro.

BRICS countries have discussed:

  • Local-currency settlement
  • Payment-system interoperability
  • Alternative financial mechanisms

But that is different from creating a single common currency.

What could India gain from greater use of the rupee?

Economic benefits

  1. Lower dependence on foreign currency

Indian businesses may have less need to acquire dollars for some bilateral transactions.

  1. Reduced currency risk

For transactions settled directly in rupees, certain dollar-related exchange risks can be reduced.

  1. Greater monetary autonomy

A more internationally accepted rupee could increase India’s financial influence.

  1. Lower transaction costs

Direct settlement mechanisms can potentially reduce intermediary conversion costs.

  1. Greater geopolitical flexibility

India can diversify its financial relationships without becoming dependent on one currency or payment system.

Challenges

India should not assume that the rupee can quickly become a global reserve currency.

  1. Limited international demand for rupee

For a currency to become truly international, foreigners must have confidence in holding it.

  1. Capital-account convertibility

The rupee is not fully convertible on the capital account.

This limits its internationalisation compared with major reserve currencies.

  1. Trade imbalance

If India imports much more from a country than it exports to it, the foreign partner may accumulate rupees without sufficient opportunities to spend them.

  1. Financial-market depth

India needs deeper and more liquid financial markets to support extensive international use of the rupee.

  1. Dollar’s network advantage

The dollar’s dominance is supported by decades of financial infrastructure and global usage.

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