India, a large country in South Asia with a population of 1.3 billion, has always had a strong sense of national pride and international ambitions, and it hopes to play an important role on the world stage, and it hopes to be able to equal, or even surpass, China in various fields such as economy, politics, military and culture.
However, contrary to expectations, India's development path has not been smooth, it has encountered many difficulties and challenges, and there is a huge gap between its dreams and reality.
Recently, India's currency, the rupee, has suffered another major setback, with its internationalization strategy nearly failing, its trading partners refusing to accept the rupee as a settlement currency, its exchange rate continuing to depreciate, and its credibility declining.
All this has dealt a heavy blow to India's ambitions and called into question India's model. Why can't India emulate China's success?
In fact, the gap is obvious, a country's economy is a huge system, involving all aspects. You can't rely on some aspects of playing and singing to get by.
First, India's industrial strength is insufficient to support the international status of the rupee
The internationalization strategy of the rupee is an important economic policy implemented by the Indian government in recent years, which aims to make the rupee one of the world's major settlement currencies, so as to enhance India's international influence and discourse, reduce India's foreign exchange risk and cost, and increase India's economic benefits and security.
The Indian government has tried to promote the internationalization of the rupee through various measures, such as signing bilateral currency swap agreements with some friendly countries, conducting pilot rupee settlement with some important trading partners, establishing channels for rupee clearing and trading with some international financial institutions and markets, and promoting and promoting the use of the rupee in some international organizations and forums.
However, the rupee's internationalization strategy did not achieve the desired results, but was met with many difficulties and resistance.
According to the latest data, India did not have a single oil import transaction settled in rupees in the 2022-2023 fiscal year, and most of the world's oil suppliers are very adamant about holding rupees. This shows that the recognition and acceptance of the rupee in the international market is still very low, and the internationalization strategy of the rupee is far from successful.
So why can't the rupee replicate the renminbi's internationalization model? The answer is actually very simple: India's industrial strength is insufficient to support the rupee's international status.
There is an essential stage before a sovereign national currency can become a major international currency, and that is a period of sustained trade surplus.
The British pound, the US dollar, the euro, the Japanese yen, these well-known major currencies have gone through this stage, and a sustained trade surplus is the best indicator of the country's industrial development, and it is also an important indicator of whether the country's currency can be recognized by other countries and regions.
In the 2021-2022 fiscal year, although exports exceeded the $400 billion mark for the first time, it is still in a deficit of $192.24 billion. In comparison, China's foreign trade surplus in 2022 was as high as US$877.6 billion.
This shows that India's industrial strength is still far inferior to China's, India's products and services have not yet formed strong international competitiveness, India's economy has not yet shaken off its dependence on the outside world, India's currency has not yet formed a stable value and credit, and India's international status has not yet been widely recognized and respected.
On this basis, India's desire to make the rupee the mainstream international currency is tantamount to a dream.
Second, India's financial market is underdeveloped and unable to absorb the international flow of rupees
Even if India can achieve a sustained trade surplus and make the rupee an international settlement currency, it will not necessarily make the rupee an international reserve currency. This is because the international flow of the rupee also requires a strong financial market to absorb and allocate it, and India's financial market is far from being developed enough to meet this requirement.
The degree of development of the financial market is an important indicator to measure a country's financial strength and financial openness, and it is also an important factor affecting the international status of a country's currency.
A well-developed financial market can provide international investors with a wealth of financial products and services, can meet their diversified investment needs and risk appetite, can ensure the safety and liquidity of their funds, and can bring them reasonable returns and returns.
In this way, international investors will be willing to hold and use the country's currency, thereby increasing the international demand and supply of the country's currency, and improving the international status and influence of the country's currency.
However, India's financial market has not yet reached such a level, its financial products and services are still very simple and inefficient, its financial supervision and transparency are still very imperfect and unstandardized, its financial risks and fluctuations are still high and uncontrollable, and its financial innovation and opening up are still very slow and conservative.
All these have made international investors reluctant to hold and use the rupee due to a lack of confidence and interest in India's financial markets and the rupee, thus limiting the international flow and reserves of the rupee.
Third, India's social system is unstable and cannot guarantee the international credibility of the rupee
In addition to industrial strength and financial markets, the international status of a country's currency is also affected by the social system, including political, legal, educational, cultural, etc. A stable and healthy social system can provide a good environment and support for the currency, and enhance the international credibility and attractiveness of the currency.
India's social system is a major obstacle to the internationalization of its currency, because there are many problems and flaws in India's social system, which have led to damage to the rupee's image and reputation in the international community.
First of all, India's political system is unstable, with frequent political turmoil, party fights, and policy reversals, which bring great uncertainty and risks to the rupee.
India is a multi-party federal republic, the power of the government is scattered between the center and the states, and the interests of political parties are also different, which makes the political decision-making process in India very complex and slow, and it is difficult to form effective consensus and execution.
India's political system is also susceptible to external disturbances and influences, such as relations with neighboring countries, pressure from international organizations, and protests from civil society groups, which will have an impact on India's economic and monetary policies, making the trend of the rupee difficult to predict.
Secondly, India's legal system is not perfect, and there are often judicial lags, legal loopholes, corruption, etc., which have brought a great credit crisis and moral crisis to the rupee.
India's legal system is based on the legal tradition of the British colonial period, and although it has undergone many revisions and reforms, there are still many outdated and unreasonable provisions, which have led to the questioning of the validity and credibility of the law.
India's judicial system is also facing a severe shortage of manpower and resources, resulting in very inefficient and lagging law enforcement and monitoring, a chronic backlog of many cases, and many criminals going unpunished.
India's legal system is also vulnerable to internal erosion and destruction, such as corruption of officials, collusion of lawyers, and favoritism of judges, all of which can cause harm to the rule of law and justice in India, and devalue and credibility of the rupee.
Finally, India's social system is unfair, with frequent disparities between the rich and the poor, caste discrimination, gender inequality, etc., which have brought great social unrest and humanitarian crises to the rupee.
India is a pluralistic society with a variety of religions, languages, cultures and castes, and these diversity, which should be India's strengths and wealth, have been distorted and exploited by the Indian social system, resulting in serious social divisions and injustices.
India's social system is based on the Hindu caste system, although the Indian constitution has abolished this system, in actual social life, caste is still an important factor in determining a person's status and rights, resulting in the deprivation and violation of basic human rights and dignity of many people.
India's social system has also failed to effectively guarantee and promote social equality and development, resulting in the lack and inadequacy of basic services such as education and medical care for many people, and the plight and distress of poverty and backwardness for many people.
India's social system has also failed to effectively maintain and promote social harmony and stability, which has led to the frequent occurrence and escalation of violence and conflicts in many people, resulting in the loss and danger of many people's lives and property. All of these pose a threat to India's social order and national security, making the prospect and future of the rupee bleak and uncertain.
epilogue
To sum up, it is very difficult and distant for India to make the rupee become the mainstream international currency, because India's industrial strength, financial market and social system do not have the conditions and capabilities to support the internationalization of the rupee.
India should have a clear understanding of its own current situation and problems, and instead of blindly imitating and catching up with China, it should formulate its own development strategy and path in line with its own national conditions and characteristics, so that it can truly realize its dreams and goals.
The internationalization of the rupee is not something that happens overnight, nor is it something that can be achieved once and for all, but something that requires continuous efforts and improvements in all aspects by India. The internationalization of the rupee is not only an economic issue in India, but also a political, legal, social, and even cultural issue in India, which requires the participation and support of the whole Indian society.
The internationalization of the rupee is not the end of India, but the starting point of India, which requires India to assume more responsibilities and obligations internationally in order to gain more respect and trust and become a better international citizen.