In September 1938, James Taylor was deputy governor of RBI. We don?t always notice it, but tucked away in one corner of currency notes is the RBI seal, with a tiger and a palm tree. When this was designed in 1938, James Taylor commented, ?a tiger looks too like some species of dog, and I am afraid that a design of a dog and a tree would arouse derision among the irreverent?. RBI sources say the quality of design was subsequently improved. But nevertheless, the tiger still looks somewhat tame and using the dog imagery, paraphrasing Sherlock Holmes, the irreverent would say it is a dog that doesn?t bark when it should and barks too much when it shouldn?t. That RBI seal may well have a parallel with the new logo for the rupee. The Cabinet has now approved the new rupee logo, based on the letter ?R? in both Roman and Devanagari, with two parallel lines (a sign of equality) running horizontally across. The designer says the tri-colour is also built into the design, with a white space in the middle, but that isn?t immediately obvious. Some RTI activists are agitated that norms weren?t followed in the design competition, but let us not get into that.
The rupee isn?t a unit of account in India alone. It figures elsewhere in South Asia and Indonesia. Had it not been for the 1966 devaluation, it would probably have continued to be a legal tender in Qatar and Dubai, too. It is also legal tender in mythical countries in a few games. As everyone knows, etymology is from the Sanskrit word for silver, with coinage once made of precious metals. In a general sense, the rupee is more ?precious? today. In 1947, we enacted a Foreign Exchange Regulation Act (FERA), because foreign exchange was scarce. (Origins actually go back to Defence of India Rules, 1939). This was meant to be temporary, for ten years. But because of irrational policies, foreign exchange shortages didn?t disappear. FERA became permanent in 1957 and was tightened further in 1973. The 1991 reforms, and subsequent years, eventually removed the forex shortage. Unless one makes comparisons with China (where forex reserves are excessive), India is flush with forex now. And in the medium term, with the growth one expects, the rupee can only appreciate and thus become more ?precious?. It should become more acceptable, not only in India, but also elsewhere. One should be more proud of the rupee. Not every country in the world has a currency logo. But the major ones (dollar, euro, yen) do. So, if we are proud of the rupee, it should have a logo.
However, are we proud about the rupee? Do we think it is a tiger and not a dog? The answer depends on its convertibility status, but only partly. Yes, global acceptability is conditional on that and yes, the rupee isn?t convertible on the capital account. Not yet, with lessons of 1997-98 and 2007-08 financial crises having been partly misread. But the party line is that the rupee is convertible on the current account. If this is correct, and if we are proud of the rupee, we should allow full convertibility on the current account. Rather oddly, we don?t allow that, but other countries do. One is not talking about hawala and illegal transactions. In parts of the Middle East (say, Dubai) and South-East Asia (say, Singapore), one can legitimately convert rupees into any other currency and vice-versa. It is different in Indian airports (and presumably sea-ports, too). Before emigration, we are technically in Indian customs territory and depending on whether one wants cash or some other instrument, subject to a ceiling, one can convert rupees into forex. For instance, if it is cash, the current ceiling is $2,000, one signs a form stating that one is not exceeding the annual current account thresholds.
Beyond immigration, one is in a duty-free zone that is global, from the exchange rate point of view. No capital account transactions are possible there. Indeed, in payments by credit cards, there are no restrictions, apart from those annual current account ceilings. But try using Indian rupees there. There is a cap of Rs 5,000 on paying at duty-free and converting rupees into forex. (The cap has ostensibly been raised to Rs 7,500 but hasn?t been implemented yet. Conversion of the rupee was earlier allowed for non-residents, but is only for residents now). Therefore, we haven?t yet scrapped the forex shortage and FERA mindset. Such airport transactions aren?t terribly important quantitatively. But they have symbolic value. The logo, too, is no more than a symbol. It means little, because it is actual policies that determine a currency?s global acceptance. In terms of the symbolic value attached to airport transactions, clearly Bangkok, Singapore and Dubai are prouder of the rupee than we are. If and when this changes, like dollarisation elsewhere, there will be greater ?rupee-isation? in South Asia and beyond. That?s where genuine pride lies, not in the logo.
The author is a noted economist