The RBI has unveiled new measures to promote wider international use of the Indian Rupee (INR), expanding both trade and investment avenues.

• Internationalisation of the Rupee means allowing the Indian Rupee to be used for global trade and financial transactions.

Key Measures Announced 

• Loans in Indian Rupees to Non-Residents: Authorised dealer banks in India and their overseas branches will be permitted to lend in INR to persons resident in Bhutan, Nepal, and Sri Lanka, including a bank.
• Establishing Transparent Reference Rates: Financial Benchmarks India Limited (FBIL) will develop transparent reference rates for the rupee against major global currencies. 
  • Currently, the RBI publishes reference rates for the U.S. dollar, euro, Japanese yen, and sterling.
• Widening Use of Special Rupee Vostro Accounts (SRVAs): SRVA balances can now be used to invest in corporate bonds and commercial papers.
  • Previously, surplus vostro balances were allowed to be invested in central government securities.

RBI has exempted SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund, a government-backed fund from its tightened rules of Alternate investment fund (AIF).

• The RBI prescribes the regulatory guidelines in respect of investment by the regulated.
• entities in AIF.

About SWAMIH, 2019

• It is a Category II AIF.
  • AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investments.
  • SEBI regulates AIF.  E.g., Venture capital funds (Including Angel Funds)
• Objective: Provide priority debt financing for completion of stalled housing projects.
• Fund Manager: SBI Ventures Limited.

Geoffrey Hinton who was awarded the 2024 Nobel Prize, warned that AI could trigger a modern Engels’ pause.

About Engels’ Pause

• It is a term coined by Oxford economist Robert Allen, based on Friedrich Engels’ observations of 19th-century Britain.
• It refers to the paradox during early Industrial Revolution in Britain (c. 1780–1840) when industrial output rose sharply but real wages of workers remained stagnant.
• There are concerns that AI driven Economy could replicate Engels’ pause, where economic growth exists but the gains are unequally distributed, leaving many behind.

RBI would continue to use the overnight weighted average call rate (WACR) as the operating target for monetary policy.

About WACR

• It is the average interest rate at which banks lend and borrow money from each other overnight, just for one day.
• Significance:
  • It reflects the short-term cost of money in the banking system.
  • It helps the RBI monitor how easy or difficult it is for banks to get funds.
    • If WACR goes up, it means money is becoming costlier; if it goes down, it means money is easier to get.

IMF projected India’s GDP growth rate for 2025-26 to 6.6% (6.4% earlier) and 6.2% for 2026-27 in its WEO. 

• Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026. 

About World Economic Outlook

• Published by: International Monetary Fund (IMF)
• Purpose: It presents analyses and projections of the world economy in the near and medium term.
• It is usually published twice a year with updates in between.

International Monetary Fund (IMF) recently released the Global Finance Stability Report (GFSR), April 2025. 

About GFSR

• Purpose: Provide a regular assessment of global financial markets and identify potential systemic weaknesses before they lead to crises. 
• Key Findings
  • Tightened Global Financial Conditions: Have caused significant increase in the Global financial stability risks.
  • Role of Major geopolitical risk events: Especially military conflicts, can lead to substantial decline in stock prices and increases in sovereign risk premiums. 
• Other Key Reports by IMF: World Economic Outlook, Fiscal Monitor.