India and China are two of the largest and fastest growing economies in the world. Notwithstanding the recent slowdown in these two economies, primarily on account of weak global economic environment, the prospects of both these economies in the medium to long-run are still considered bright. 12.
Given a choice, I am sure, most of the countries would like to see their currencies as an international currency as the benefits far outweigh the associated risks.1 While the benefits could be in terms of reduced transaction costs, seigniorage, macro-economic flexibility in terms of ability to finance external payment deficits in own currency, the associated reputational gain, etc., the costs involved could be in form of sharp appreciation of currency as the currency gains recognition as an international currency that can also be used as a preferred reserve currency by the monetary authorities, and constraints on domestic monetary policy implementation.