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22nd October Current Affairs

Internationalization of rupee

(GS-III: liberalization of the Indian economy)

In News:

RBI dy governor T Rabi Sankar has marked upon the importance of the internationalization of the rupee, its advantages and associated risks.

Internationalization of rupee:

It is the process that involves increased use of the rupee in cross-border transactions.

Currently, while the dollar accounts for 88% of international trade, Rupee accounts for less than 1.7% of global trade.

India currently has full convertibility of the rupee in current accounts such as for exports and imports. However, India’s capital account convertibility is not full. There are ceilings on government and corporate debt, external commercial borrowings and equity.

Need for Internationalization:

Excessive dependence on dollars combined with global inflation and economic crises has led to the depreciation of the rupee to an all-time low. If the rupee is internationalized, India would not have to depend on US Dollars for its trade.

RBI has allowed domestic traders to settle their import-export bills in rupee.

Advantages of Internationalization:

Appreciate currency value: It will improve the demand for the rupee in international trade.

Mitigate exchange rate volatility: Rupee-denominated payments can help reduce price volatility associated with dollars.

Making significant savings in Indian foreign reserves.

Circumvent sanctions: Improving acceptance and trade in rupees can help India to diversify its trade basket by circumventing restrictions and sanctions imposed by the west.

Improve its standing as a global economic power.

Associated risks:

Impact on monetary policy: The internationalization of the rupee will limit the country’s ability to create a monetary policy specific to its local economic demand.

The Indian economy will become more susceptible to international economic fluctuations.

Managed currency has been utilized to protect the economy from damages during the economic crises of 1980 and 2008. It may not be the case anymore.

The outflow of Hot money: Complete internationalization of currency will expand the risk of hot currency (highly prone to sudden outflows) to capital assets. Eg: east Asian crisis in 1997.

Steps needed for internationalization of the rupee:

India needs to open its currency to complete capital account convertibility.

Frame policies cautiously and test them in the Regulatory sandbox environmen

Bilateral and multilateral trade agreements can be used to test the viability of internationalized rupee e.g. using the Vostro account for Rupee trade with Russia and Iran.

Improvements in financial fundamentals and steps to improve sovereign credit ratings.


Internationalization of the rupee though with associated risks is inevitable if India is to emerge as a global economic power in a multipolar world.

General consent for CBI

In News:

Recently Maharastra government has restored general consent for CBI.

What is the general consent for CBI?

General consent is normally given by states to help the CBI in the seamless investigation of cases of corruption against central government employees in their states.

This is essentially consent by default, which means CBI may begin investigations taking consent as having been already given.

The consent of the state government to CBI can be either case-specific or “general”.

In the absence of general consent, CBI would have to apply to the state government for its consent in every individual case, and before taking even small actions.

Why CBI needs general consent?

The CBI is governed by the Delhi Special Police Establishment Act which makes consent of a state government mandatory for conducting an investigation in that state (Section 6 of The DSPE Act).

What does its withdrawal mean?

It simply means that CBI officers will lose all powers of a police officer as soon as they enter the state unless the state government has allowed them.

Traditionally, almost all states have given CBI general consent.

Currently, states which have withdrawn consent include Meghalaya, Punjab, Rajasthan, West Bengal, Jharkhand, Chhattisgarh, Kerala, and Mizoram.

Can withdrawal mean that the CBI can no longer probe any case?

The CBI would still have the power to investigate old cases registered when general consent existed.

Also, cases registered anywhere else in the country, but involving people stationed in states which have withdrawn consent, would allow CBI’s jurisdiction to extend to these states.

China plus one strategy

In News:

There is fear that the energy crisis in Europe may force companies to opt for Europe Plus one strategy wherein they start avoiding Europe for investment (similar to China plus one strategy)

What is the China-plus-one strategy?

China-plus-one is a strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.

Why opt out of China?

China was an attractive investment location due to the low cost of labour and production and an increasing domestic consumer market.

However, supply chain disruptions (chip shortage, container shortage), China’s data privacy law and China’s zero-Covid policy has forced companies to downsize their presence in China.

Pakistan is out of FATF ‘grey list’ on terror funding

In News:

Pakistan is off the ‘grey list’ of the Financial Action Task Force (FATF) after four years.

Practical benefits Pakistan can get as a result of the FATF de-listing:

receive a reputational boost and get a clean bill of health from the international community on terrorist financing.

Increase in overseas investment in the country.

What is FATF:

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the

It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.

Roles and functions:

Initially, it was established to examine and develop measures to combat money laundering.

In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.

In April 2012, it added efforts to counter the financing of the proliferation of weapons of mass destruction.

Composition: it currently comprises 37 member jurisdictions and 2 regional organisations. It also has observers and associate members.

What are a blacklist and a grey list?

Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities.

Currently, it includes countries like Iran, Myanmar and North Korea.

Grey List: Countries that are considered a safe haven for supporting terror funding and money laundering are put on the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.

After, Pakistan’s delisting, 23 countries remain under watch including countries like the Philippines, Syria, Yemen, the United Arab Emirates