At the recent IMF-World Bank meeting, RBI Governor Sanjay Malhotra passionately called for a global shift towards Central Bank Digital Currencies (CBDCs) over stablecoins, highlighting the importance of these digital currencies for enhancing India’s economic resilience amid increasing US tariffs. His statements come at a time of significant scrutiny on how digital currencies are reshaping global finance and trade.
RBI’s Push for CBDCs Over Stablecoins
In a groundbreaking address, Malhotra emphasized that CBDCs possess distinct advantages, such as tokenization and the integrity of fiat money. He stated,
“Unless other countries also adopt CBDC, we are not going to see the benefits of CBDC insofar as cross-border payments are concerned,”
urging global central banks to actively consider the adoption of CBDCs to fully realize their potential for transforming international payments.
The Reserve Bank of India (RBI) has initiated pilot projects aimed specifically at cross-border transactions, recognizing that domestic payment systems in India remain robust. These pilot programs for both retail and wholesale CBDCs are designed to explore the future of digital currency integration within the global financial ecosystem.
India’s Economic Growth and Forecasts
The RBI’s outlook for India’s economic growth has remained largely optimistic, with a target of 6.8% for the fiscal year. Malhotra described the country’s growth trajectory as “phenomenal,” citing a remarkable GDP increase of 7.8% in the April to June quarter. The World Bank and IMF echoed this sentiment, raising their growth forecasts for India this year to between 6.5% and 6.6%.
However, looming issues, particularly US tariffs, have tempered expectations for the following fiscal year, bringing down predictions to 6.2-6.3%. Malhotra acknowledged these challenges but remained hopeful, stating that “there will be an upside if we are able to have an early resolution to the tariffs,” showcasing India’s resilience amidst a complex geopolitical landscape.
Impact of US Tariffs on Trade Deficit
The ongoing trade tensions between India and the US are having a tangible impact, as highlighted by India’s merchandise trade deficit, which widened to $32.15 billion in September—a 13-month high. This surge in deficit can be attributed to increased gold imports and a noticeable drop in exports to the United States, exacerbated by recently imposed tariffs that have affected nearly 55% of Indian goods exported to the US.
Malhotra noted,
“We have in our projections actually taken into account the higher tariffs as the baseline. But negotiations are on,”
emphasizing that fresh discussions between India and the US could provide a pathway to alleviate some of the economic pressures. As the two nations engage in trade talks, the hope remains that resolution strategies could stabilize trade flows and strengthen economic ties.
RBI’s Currency and Liquidity Interventions
The RBI’s active involvement in managing India’s currency stability is evident through its substantial interventions in the foreign exchange market aimed at preventing the rupee from breaching its all-time low value. Malhotra stated that their focus lies in ensuring an “orderly movement” of the rupee, addressing the need for stability amidst a murky economic backdrop.
The central bank has also implemented a phased cut in the cash reserve ratio (CRR) in efforts to stimulate liquidity; however, this has yielded less impact than anticipated due to simultaneous tightening actions by the RBI. “Our effort is to ensure that there is an orderly movement of the rupee both sides, and any undue or abnormal volatility is curbed,” Malhotra reiterated, reinforcing the RBI’s commitment to mitigating currency fluctuations in the face of external pressures.
Global Fintech Innovations
Amidst these economic developments, the RBI is making strides in fintech innovation. At the recently concluded Global Fintech Fest 2025 in Mumbai, the central bank introduced AI-driven solutions such as the UPI HELP system, designed to facilitate seamless digital transactions. The introduction of features like wearable smart glasses for payments represents a leap towards transforming consumer interactions with digital finance.
Finance Minister Nirmala Sitharaman noted the comprehensive impact of these technological advancements, saying,
“Such developments underscore the scale of the transformation underway. Whether we welcome these shifts or not, we must prepare to engage with them,”
underscoring the importance of adaptation in an evolving financial landscape. The integration of AI with human insight in financial decision-making stands to empower a new era of inclusive access to financial services.
Embracing the Future of Finance
As the RBI continues to advocate for the adoption of CBDCs and navigate the complexities of international trade, the call for a collaborative approach among countries becomes increasingly vital. With the global acceptance of stablecoins on the rise, India’s stance on encouraging CBDC adoption positions the nation at the forefront of a financial revolution that seeks to redefine the boundaries of money as we know it.
It is evident that the journey toward integrating advanced digital currencies into the global finance framework is not just an opportunity for India but a necessary evolution in an interconnected world. As central banks and governments adapt to these challenges, one thing is clear: the future of finance is digital, and the conversation is just beginning.
