India Allows Rupee Settlement Options for Foreign Trade and Commerce

India Allows Rupee Settlement Options for Foreign Trade and Commerce

The government of India has announced plans to offer rupee settlement options for foreign trade and commerce. The new framework for foreign trade policy went into effect on April 1. The Commerce Secretary to the government in India has stated that the country has introduced this measure to ease payments for countries experiencing US dollar problems for foreign trade settlements.

Rupee Settlement Option for Countries Facing USD Crisis

The government of India has introduced a new settlement option besides the US dollar for international trade and commerce. The new foreign trade policy guidance, which commenced on April 1, includes a new option of settlement in Indian rupees, offering countries facing the US dollar problem a way to continue trade and commerce.

The new directive is largely directed to help countries like Sri Lanka, Bangladesh, and Egypt, which are facing difficulties in obtaining US dollars to pay for goods with India. Commerce Secretary Sunil Barthwal stated that this measure would help the countries against a hypothetical dollar drought.

The move is also seen as part of New Delhi’s efforts to profile its currency at a global level. The Ministry of Commerce in India explained that the new foreign trade policy plan was designed to "work towards making the Indian rupee a global currency, adding further impetus to India’s emergence as the global trading hub."

Countries Moving Away from the US Dollar Hegemony

India is among the countries that have put in motion initiatives to reduce dependence on US dollars for international settlements. China, part of the BRICS bloc (Brazil, Russia, India, China, and South Africa), has also been promoting the use of the Chinese yuan as part of an international de-dollarization policy.

Chinese President Xi Jinping and Russian President Vladimir Putin agreed on a yuan settlement during Xi’s visit to Russia on March 21. Putin supported the use of the Chinese yuan to settle payments with emerging economies in Asia, Africa, and Latin America. China has recently inked a deal with the Brazilian government to drop the dollar for their bilateral settlements in favor of national currencies.

Other blocs are also contemplating ways to end their reliance on the US dollar. ASEAN, the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam), has been pushing its members to use national currencies for payments, fearing US secondary sanctions for not enforcing a trading ban on Russia.

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