DOLLARIZATION OF INDIAN ECONOMY

DOLLARIZATION OF INDIAN ECONOMY

TOPIC: Economy

Context- If India allows a private currency like cryptocurrency in the country it could lead to Dollarisation of the Indian economy and the central bank will lose the ability to control policy, said RBI Deputy Governor Rabi Sankar.

Concept-

Dollarisation of Indian economy:

• Adopting a private currency will be a retrograde step that can eventually result in private currency replacing the Indian rupee to some extent.
• In such a circumstance, there would be a parallel currency system (or systems) in the country.
• Thus, increased acceptance of cryptocurrencies would result in effective ‘Dollarization’ of our economy.
• “Dollarization would undermine the ability of authorities to control money supply or interest rates, as monetary policy would not have any impact on the non-Rupee currencies or payment instruments.

Cryptocurrencies:

• A cryptocurrency is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database.
• It uses strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.
• It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
• Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.