Prime Minister Narendra signed a currency swap agreement for an amount of $75 billion with Japanese Prime Minister Shinzo Abe, during his three day Japan visit. Experts believe that this deal would bring much needed stability to Indian currency, Rupees.
“The Prime Ministers of India and Japan, building on great friendship between the two countries and to further strengthen and widen the depth and diversity of economic cooperation, agreed during Prime Minister Modi’s visit to Japan, to conclude a Bilateral Currency Swap Agreement for an amount of $75 billion,” the Indian government said in a statement. It added, “The agreement should help bring greater stability to foreign exchange and capital markets in India.”
With a view to enhancing financial and economic cooperation, governments of Japan and India welcomed the agreement to conclude a Bilateral Swap Arrangement (BSA) of USD 75 billion,” said India-Japan Vision Statement issued after the summit-level meeting between the two leaders.
The swap agreement, a Finance Ministry’s release said, should “aid in bringing greater stability to foreign exchange and capital markets in India…This facility will enable the agreed amount of foreign capital being available to India for use as and when need arises”.
Recognising the unparalleled potential for development of relations between the two countries, the prime ministers reviewed the significant milestones achieved over the last four years.
The agreement offers some comfort to the country facing rupee and current account deficit woes. The swap agreement implies that India can take up to $75 billion from Japan in exchange of the rupee as and when the need arises. Japan can also do the same in exchange of the Yen. The agreement would be implemented by the Reserve Bank of India and the Bank of Japan. India has had similar agreements before, it has never had to resort to it.