India Eyes Rupee Inclusion in IMF's 2027 SDR Basket Review
The International Monetary Fund (IMF) will conduct its next review of the Special Drawing Rights (SDR) basket by July 2027, a process that could potentially include the Indian rupee. The SDR, created in 1969, is an international reserve asset designed to supplement the official reserves of IMF member countries. Currently, the SDR basket consists of five currencies: the US dollar, euro, yen, pound sterling, and renminbi.
India is strategically positioning the rupee for inclusion in the SDR basket, driven by economic growth, trade linkages, and digital payment networks. The country's export-to-GDP ratio stands at 22%, compared to 21% for Japan and China, and 11% for the US. India's infrastructure investment-driven GDP growth and the international appetite for rupee masala bonds make the rupee an attractive candidate. However, the 'freely usable' criterion remains a roadblock for its inclusion.
To meet the criteria for SDR inclusion, a currency must be widely used in international transactions and traded in foreign exchange markets. The IMF plans to limit the SDR basket to no more than five or six currencies. Additionally, the IMF is considering new criteria that combine exports with international financial inflows and replace exports with market gross domestic product (GDP).
India's efforts to internationalize the rupee include participation in the Bank for International Settlements' 'Project Nexus,' which integrates its interoperable payment system with other countries. The Unified Payments Interface (UPI) has expanded to 11 countries and is set to launch in over 40 more, facilitating low-cost money transfers. The country's multicurrency real-time gross settlement system achieves payments in under 60 seconds.