India’s Chief Economic Advisor (CEA) Arvind Subramanian has suggested that India must encourage the entry of China’s currency Renminbi into the International Monetary Fund’s (IMF) basket of Special Drawing Rights (SDR) and support the internationalisation of the currency. “India must support the entry of the Renminbi into the IMF’s basket of SDRs. As the currency becomes more international, the more open it will become to the world. At the same time, the less China will be able to manipulate it, which is to India’s advantage,” said Mr Subramanian.
India’s strategic objective should be to strengthen multilateral institutions and pressurise China. He also said that India should convince the US to join multilateral institution such as the Asian infrastructure Investment Bank (AIIB) and it was a big mistake by the US not to join the institution, as it could have countered China’s regional interests through the bank.
Praising the Chinese model of development based on exports and building reserves, Mr Subramanian underlined that India could learn much from China. “The power of USD 3.5-4 trillion of reserves is not to be sneezed at,” he said. Speaking about the benefits of internationalising Renminbi he said: “On the Renminbi, I think we have an unambiguous interest in supporting the Renminbi becoming the part of SDR basket. I said so because essentially as the Chinese currency becomes more and more international, china will have to open up its economy which is good for the world, good for China.”
According to Mr Subramanian, China should be allowed to get the geo-political benefits arising out of its currency becoming more international because the concrete economic manifestation is that it will both open up and tie the Chinese economy.
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