In what appears to be a significant shift in India’s trade dynamics, Commerce and Industry Minister Piyush Goyal revealed on March 11 that several countries, both large and small, are eager to engage in trade with India using the Indian rupee as the trading currency. Notable among these nations are neighboring countries like Bangladesh and Sri Lanka, as well as Gulf countries, who have shown a keen interest in the initiative.
Minister Goyal emphasized that while Bangladesh and Sri Lanka are ready to commence trade immediately, Gulf nations are earnestly exploring the possibility of trading in rupees with India. Moreover, he pointed out that more developed countries in the Far East are likely to join this trend in the future, with Singapore already taking steps in that direction.
This transition towards trading in local currencies is gaining momentum globally, with countries recognizing the advantages of conducting transactions in their domestic currencies. By eliminating the need to convert currencies into a third-party currency, both parties involved can significantly reduce transaction costs.
The UAE, being one of the pioneering economies to adopt this approach, has witnessed substantial progress in this regard. India’s initial payment for crude oil in rupees from the UAE marked a milestone in this initiative. This method has not only attracted countries facing US dollar shortages but has also provided stability against other international currencies, making the rupee an appealing choice for trade partners.
To facilitate international trade using the rupee, modifications have been made to the Foreign Trade Policy (FTP) to enable settlements in rupees and promote the INR as a global currency. In line with this, the Reserve Bank of India (RBI) has authorized local banks to open and maintain special rupee Vostro accounts for foreign banks of partner countries. These Vostro accounts play a crucial role in simplifying trade transactions by providing a direct channel for converting and transferring rupees between trading partners.
In conclusion, India’s proactive approach towards promoting rupee trade globally not only bolsters its trade relations with key partners but also positions the Indian rupee as a prominent currency in the international trade arena, promising a more seamless and cost-effective trading environment for all parties involved.
