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India, Sri Lanka mull common currency
By agencies
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Friday, 03 June 2005, 19:30 IST
NEW DELHI: Taking a cue from the success of the Euro, India and Sri Lanka are exploring the possibility of a common currency, a move that could drastically change the economic landscape of South Asia.
Sources in the government said Sri Lanka made the offer to expand the scope of the free trade agreement between the two neighbors. There is also a proposal to allow free trade of Indian scrips in Colombo and vice versa.
The proposal involves supplanting the Sri Lankan rupee by the Indian rupee at an agreed exchange rate. At present, the exchange value of a Sri Lankan rupee is about 0.44 Indian paise.
Government officials said this is a momentous offer and will require a long preparatory work before any decision could be taken. They said a common currency regime for the two countries would need a uniform monetary policy.
One of the basic issues to confront will be the different pace of progress made by the two countries on the road to capital account convertibility.
The Sri Lankan rupee has managed to float like Indian rupee, however it has moved ahead in convertibility. The Indian federal Bank RBI will have devise methods to harmonize all these factors.