The ‘Exclusionary Vision’ Dilemma for Sovereign Countries

Sovereign nations protect their distinct cultural foundations while still upholding an inclusive vision of governance. The same principle should apply to India. The ‘Universal Oneness Celebration’ event that was recently held in New York City attracted criticism that was only to be expected from certain obvious quarters who chastised the Rashtriya Swayamsevak Sangh (RSS) for having an allegedly ‘exclusionary vision’. In a free society, one can always express a personal opinion on the...

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The ‘Exclusionary Vision’ Dilemma for Sovereign Countries

Sovereign nations protect their distinct cultural foundations while still upholding an inclusive vision of governance. The same principle should apply to India. The ‘Universal Oneness Celebration’ event that was recently held in New York City attracted criticism that was only to be expected from certain obvious quarters who chastised the Rashtriya Swayamsevak Sangh (RSS) for having an allegedly ‘exclusionary vision’. In a free society, one can always express a personal opinion on the effectiveness with which the stated ideology or philosophy of any organisation is being implemented on the ground. However, labelling an organisation that considers ‘Vasudhaiva Kutumbakam’ as its core belief as having an ‘exclusionary vision’ is curious, to say the least. We are living in a world of different sovereign countries, each with its own history, cultural identity that acts as a foundation for nation-building and, of course, its own international borders and immigration policies. It is interesting to see how different countries look at the cultural identity and ethos that shape them, and how they protect the foundation on which they stand while still championing their own ‘inclusive vision’. Illusion of Contradiction Take France as an example. The principles of Liberty, Equality and Fraternity were born out of the French Revolution. They serve as the guiding star for France. Many other countries in the world have also adopted these principles and drawn inspiration from them. Such noble principles, however, are never sufficient to define the foundation of a sovereign country that differentiates it from others. While Liberty, Equality and Fraternity are held in high regard in France, the French language is the foundation on which France stands as a sovereign country. As it is often said, language carries with it not merely its grammar and vocabulary, but a whole culture of its own. Approximately 13 percent of the population in France has a mother tongue different from French. It is noteworthy how France looks at its cultural foundation — the French language — vis-à-vis the spirit behind the principles of Liberty, Equality and Fraternity enshrined in its Constitution. Article 2 of the same French Constitution explicitly states that France has only one official language — French. From time to time, there are demands to grant official status to other minority languages, but they face tremendous political and legal resistance and are shot down. Other languages are denied even ‘co-official’ status because this is perceived as a direct threat to the deeply rooted ideology of the centralised linguistic unity of France. It goes a step further. There is a concerted, systematic effort to preserve the ‘purity’ of the French language and fight the ‘invasion of English’, called Franglais. It is mandatory under the law, including the Toubon Law, to use the French language in government publications and workplaces, and to include a French translation if any English slogan is used even in a commercial advertisement. Similarly, although Italy recognises a few ‘minority languages’, its official national language is only one — Italian. The approach taken by Germany or Japan is broadly the same. One cannot but wonder whether the same critics of the RSS would call an approach taken by France ‘exclusionary’. The fact is that every sovereign country has its own cultural foundation, which is the cause of its very existence. Countries go out of their way to ‘exclusively’ protect and preserve that cultural foundation. That does not mean, however, that France exclusively belongs only to the majority population whose mother tongue is the same as the national language. Nor does it mean that the State will treat its citizens differently based on their mother tongue, or give preferential treatment to the majority community over linguistic minorities. It is in this perspective that one needs to look at the civilisational ethos dating back thousands of years that forms the foundation of the Indian subcontinent, and the historical context of events that led to India being born as a present-day sovereign country in 1947. How India should treat its cultural foundation is no different from how France, Italy, Germany or Japan should do it. Needless to say, neither India nor any of these other countries discriminate against certain citizens when it comes to governance and the rule of law. There is no contradiction or ‘exclusionary vision’ whatsoever in the approach taken by France, and the same should hold true for India as well. Contextual Similarity As far as the United States of America is concerned, neither any particular language, nor any religion, nor any ethnic origin independently defines the cultural foundation of that country. And yet, there is certainly an ‘American culture’ that defines the country and acts as its foundation. People from all over the world, with very different backgrounds, have migrated to that land and ‘American culture’ has assimilated them. Although it may be difficult to define it very clearly, there is certainly ‘Unity in Diversity’ in American culture. The country calls itself ‘a melting pot’. It goes out of its way to protect this attribute through uniform civil laws that apply to all citizens regardless of their religion or ethnicity. Not everything was just and fair in American history. However, American culture and its democratic ethos not only allow open discussion and debate on what was wrong, but also encourage action on the ground to correct historical wrongs. Former President Bill Clinton summarised it well in one of the presidential debates when he said: “There is nothing wrong in America that cannot be corrected by what is right in America.” When it comes to immigration, whether for tourism or work, the US perhaps has been the most open country for several decades. Its policy towards even illegal immigration has been very soft. It has realised, however, that all this is being taken for granted by many countries and even deliberately misused. Any legitimate attempt, in the larger interest of the country, to change and tighten that policy and stop illegal immigration and settlement invites severe criticism. With that criticism, ironically, an otherwise very open and welcoming country gets painted as being very rigid and intolerant. This specific aspect of American culture, and the criticism it faces, has a clear parallel with the civilisational ethos that forms the foundation of India. Indian culture has also assimilated people from many parts of the world for centuries. It too has its own ‘Unity in Diversity’ that is not very easy for many to define and appreciate. It also welcomes open discussion about historical wrongs and makes a sincere attempt to correct them. The accommodating and welcoming nature — the ‘Atithi Devo Bhava’ psyche — implicit in Indian culture has also been deliberately and rampantly misused. Any attempt to enforce the law of the land invites the same criticism that the US faces. Needless to say, India, like the US or any other country, would and should go out of its way to protect its cultural foundation. Doing so can be termed an ‘exclusionary vision’ only as part of a motivated agenda, if not an absolute unwillingness or inability to grasp and respect the cultural foundations of different countries. There is a need to refine and temper the definition of the so-called ‘exclusionary vision’ for it to make sense in a world of sovereign nations that want to legitimately protect their individual identities in different ways. In other words, the very definition of ‘exclusionary vision’ itself needs to be more ‘inclusive’ in more ways than one. Given its history, the US perhaps is the best country to appreciate what it means to espouse ‘Vasudhaiva Kutumbakam’ as an inclusive ideology. It is also the best country to appreciate the fact that attempts to prevent the deliberate misuse of an inclusive ideology cannot be termed an ‘exclusionary vision’. (The writer has worked in the Information Technology sector. Views personal.)

The Making of India’s Forex Fortress

Amey Chitale

6 days ago

5 min read

Part 2: Three decades after the 1991 crisis, India’s record Forex reserves have transformed the country from a crisis-prone borrower into an economy with a formidable external shock absorber.

Three decades ago, India had so few dollars that it had to pledge gold to avert a balance-of-payments crisis. Today, it sits on a foreign-exchange war chest of more than US$700 billion. The journey from near-bankruptcy to external resilience is one of the quieter successes of India’s economic reforms and one of the clearest examples of why central-bank prudence matters.

As India’s economy liberalized and attracted large foreign capital inflows during the 2000s and 2010s, the RBI faced the challenge of managing these inflows without destabilizing domestic liquidity or undermining export competitiveness. Its response was a strategy of “silent reserve accumulation”. Large capital inflows created upward pressure on the rupee as investors converted dollars into local currency. Left unchecked, a sharply appreciating rupee could have weakened exports and encouraged imports. To prevent this, the RBI regularly intervened in the forex market, purchasing surplus dollars and adding them to its reserves. This approach helped steadily build a strong reserve buffer without disrupting broader macroeconomic stability.

Unlike some export-led economies that used reserves to maintain an artificially undervalued currency, the RBI has viewed forex reserves primarily as a safeguard against external shocks, capital outflows, currency speculation and global financial volatility. Accordingly, RBI interventions in the forex market have focused on smoothing excessive fluctuations and maintaining orderly market conditions, rather than defending any specific exchange-rate level.

Building the Fortress

India’s forex reserves have grown from a few tens of billions of dollars in the early 2000s to over US$700 billion by 2026. Rather than remaining idle, these reserves are actively managed by the RBI with three priorities: safety, liquidity and return. The bulk is held as Foreign Currency Assets (FCAs) invested in highly rated sovereign securities, while gold holdings have been steadily increased to enhance diversification and serve as a hedge during periods of global uncertainty. In addition, Special Drawing Rights (SDRs) and India’s reserve position with the IMF provide supplementary sources of international liquidity. This diversified reserve portfolio has strengthened India’s ability to withstand external shocks.

When the collapse of Lehman Brothers in 2008 triggered a global flight to safety, emerging markets witnessed sharp capital outflows and intense demand for dollar liquidity. India faced outflows of nearly US$26 billion, while the rupee depreciated from about Rs. 39 to Rs. 48 per US dollar.

Unlike in 1991, however, India entered the crisis with forex reserves sufficient to cover eight to nine months of imports. This strong reserve buffer enabled the RBI to inject dollar liquidity, stabilize forex markets and prevent disorderly currency movements. Crucially, India weathered the crisis without seeking emergency assistance from multilateral institutions. The episode underscored the strategic importance of robust forex reserves, which acted as an effective shock absorber and insulated the economy from a much deeper downturn.

The Taper Tantrum

The 2013 “Taper Tantrum” was India’s most severe external-sector challenge since the 1991 BOP crisis. Triggered by signals from the US Federal Reserve that quantitative easing would be scaled back, global capital rapidly exited emerging markets. With a CAD of nearly 4.8% of GDP and high inflation, India was among the so-called “Fragile Five” economies. Investor sentiment deteriorated sharply, causing the rupee to slide from around Rs. 55 to nearly Rs. 69 per US dollar within four months.

In response, the RBI launched the FCNR(B) swap scheme, offering banks an attractive swap facility to mobilize long-term NRI dollar deposits. The initiative attracted nearly US$34 billion in inflows within weeks, replenished reserves, stabilized the rupee and restored investor confidence. The episode demonstrated how innovative policy measures and a strong institutional response could effectively counter external shocks and safeguard macroeconomic stability.

The COVID-19 pandemic in 2020 triggered severe disruptions across global financial markets, leading to volatile capital flows, a sharp rise in demand for dollar liquidity and a stronger US dollar. For India, however, the crisis did not evolve into a BOP emergency as it had in 1991. Decades of prudent external-sector management and sustained reserve accumulation had created a substantial forex buffer. Equipped with ample reserves, the RBI was able to inject liquidity, stabilize financial markets and contain excessive currency volatility. As a result, India absorbed the external shock without compromising macroeconomic stability.

Geopolitical tensions in West Asia and Brent crude prices above US$100 per barrel have put significant pressure on India’s import bill and external balance. At the same time, heightened global risk aversion has triggered substantial capital outflows, with FIIs selling a record Rs. 1.07 trillion of Indian equities.

Unlike the crises of 1991 and 2013, however, India entered this period with a forex reserve buffer of about US$700 billion. Leveraging this strength, the RBI intervened actively in the forex market, reportedly supplying around US$26 billion in March 2026 alone to curb excessive volatility. Although the rupee depreciated sharply, financial markets remained orderly and stable.

A New Dollar Lifeline

Furthermore, the RBI revived the FCNR(B) scheme in 2026 to strengthen foreign-currency inflows and alleviate structural liquidity pressures in the domestic financial system. Building on the success of the 2013 initiative, the redesigned framework offered broader participation and greater certainty on hedging costs, making it more attractive for market participants. The scheme encouraged banks, public-sector enterprises and quasi-sovereign institutions such as REC, PFC and EXIM Bank to raise funds through External Commercial Borrowings and NRI deposits.

Beyond boosting forex inflows, the initiative delivered a significant macroeconomic benefit by enabling large borrowers to access offshore funding, thereby reducing pressure on domestic liquidity and credit markets. The response was overwhelmingly positive, attracting sizable inflows and reinforcing investor confidence in India’s macroeconomic fundamentals. Reflecting its strong demand and effectiveness, the RBI closed the scheme well before the originally announced deadline, underscoring its success as a targeted liquidity and external-sector management tool.

The benefits of large forex reserves extend well beyond import cover. A strong reserve position enhances India’s sovereign credibility, reassuring investors and rating agencies of the country’s ability to meet external obligations even during periods of global financial stress. It also helps lower forex risk premiums, reducing borrowing costs for Indian businesses and improving their global competitiveness.

Managing such large reserves, however, requires careful liquidity management. When the RBI purchases dollars, it injects rupee liquidity into the banking system, which can create inflationary pressures. To neutralize this effect, the RBI undertakes sterilization operations. As capital inflows surged, the Market Stabilization Scheme (MSS) was introduced in 2004 under Governor Y.V. Reddy, allowing the government to issue special securities solely for absorbing excess liquidity. Although sterilization entails a fiscal cost, it is widely viewed as a necessary insurance premium for preserving macroeconomic stability and protecting the economy from external shocks.

Despite India’s record forex reserves, the rupee can still depreciate because the RBI does not target a specific exchange rate. Instead, it focuses on maintaining competitiveness and macroeconomic stability. Since India’s inflation is often higher than that of its major trading partners, gradual nominal depreciation helps prevent the rupee from becoming overvalued and hurting exports.

Moreover, India’s key imports, such as crude oil, electronics and gold, are largely price-inelastic, so an artificially strong rupee would not significantly reduce import demand. Consequently, the RBI uses its reserves primarily to smooth excessive volatility and contain speculative pressures during periods of stress, rather than defend a particular rupee level. In this sense, forex reserves act as a financial shock absorber, helping the economy withstand external disruptions while allowing the currency to adjust to underlying economic fundamentals.

Over the past 35 years, India’s forex-management framework has undergone a remarkable transformation, evolving from crisis-driven survival to a position of strength and resilience. The benefits of record reserves are visible in lower borrowing costs for Indian firms, greater resilience to large capital outflows and enhanced financial stability during periods of global uncertainty.

Most importantly, robust reserves provide the RBI with invaluable policy flexibility. Rather than being forced to react to external shocks, the central bank can independently pursue domestic monetary and financial stability objectives.

(The writer is a Chartered Accountant with a leading Mumbai-based company. Views personal.)

The ‘Exclusionary Vision’ Dilemma for Sovereign Countries

The Making of India’s Forex Fortress

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