Stakeholders in trade and domain specialists are cautiously optimistic on settlement of trade in Rupee with a wait-and watch-approach, as the mechanism draws global interest from countries across regions.
Naren Goenka, Chairman of Apparel Export Promotion Council : The RBI’s move to allow settlement of trade in Rupee will definitely help in trading with countries where forex situation is not good, who don’t have enough dollars and are looking to diversify due to sanctions. There is no particularly good time for a measure like this which is always welcome but geopolitical conditions have converged to make this an opportunely taken step. For the textile sector it will facilitate trade, especially with countries like Russia where we are looking to tap the demand potential for textiles and apparels. The mechanism will definitely help, slowly and steadily in expanding trade with countries which don’t have enough dollar reserves and use the bilateral rupee trade. Still there are concerns about some banks not dealing with the countries which are under sanctions. Overall, it is a good step and we are looking forward in using this quite regularly with different countries–not the regular traditional ones like Japan, Australia but others as they come forward to adopt the mechanism.


Gaurav Moda, Ernst & Young India Energy Industry Head : As one of the world’s fastest growing large economies, India’s energy needs continue to expand rapidly. Resources from across the world are essential to fulfil such needs. In this light, India’s robust financial network connected globally has been critical in providing flexibility for direct settlements. This is core to fulfilling the energy needs for India’s continued growth path, which all of us benefit from.


Prabir Dey, Professor Research and Information System for Developing Countries (policy research institute)  : The importance of allowing settlement of foreign trade in Rupee by RBI has to be seen in the context of the processes involved in international trade today. An export brings earnings while import involves making a payment for a good or service bought, which in case of a remote location, come into the bank. These transactions are primarily done by a mechanism called SWIFT. Once the money is paid into the account in Rupee, it goes to the SWIFT in the US and converted into dollars and paid to the recipient. This mechanism is in favour of the US dollar. In case of US sanctions on a country, say Myanmar, transactions cannot be done in dollar. The US has different kinds of sanctions–country specific, product specific and company specific.
This becomes a great disadvantage. For example in the case of Russia, which has US sanctions, trade cannot be done in dollar and in the absence of a Rupee-Rouble arrangement between the Central banks, it would be impossible for exporters to trade or importers to bring in goods. In all these export-import transactions, there is a good amount of insurance involved with the stakeholders located in various developed countries who will not insure those goods and services that are traded between a sanctioned country and a non-sanctioned country. This makes the US dollar an unfavourable choice as the medium of trade between two important partners.
In the case of India, while our major partners are the US and China, there is also growing bilateral exchanges with neighbouring countries like Bhutan, Bangladesh, Nepal, Sri Lanka, Myanmar and Iran. There are purely market driven countries which want trade to be done in local currency like Bangladesh, Maldives, some Middle East countries and some African ones. Those nations who are having trade surplus, like India, get their currency back. For instance if India exports USD 100 mn (hypothetical) to Maldives and it exports to India USD 10 mn of goods, the latter has a deficit of USD 90 mn in the current account. There are also issues with the dollar, given the rapid devaluation of the currency—against the dollar—all over the world by countries like India due to stepped up purchase of the dollar from the open market by the US due to its favourable economic conditions. Against this backdrop and the geopolitical uncertainties, countries like Bangladesh or Maldives are preferring to trade in local currency which saves them from fluctuations against the dollar. At the same time, they have reserves of Indian rupee which they can utilise as they want. These are the dynamics that make a strong case for rupee trade settlement and trade in local currency. It is also a common practice as in trade between African or southeast Asian countries as for example trade between Thailand and Lao PDR in Thai Baht and Lao dollar.
Suranjan Gupta: Executive Director of Engineering Exports Promotion Council of India: It is a good initiative which would help Indian exporters in dealing with countries which do face foreign exchange problems. Of course further steps need to be taken like opening Vostro accounts with more countries. Once that is done, the rupee trade mechanism can be extended to countries like Bangladesh and Myanmar which do face challenges with respect to foreign exchange. Once these arrangements pick up, fully incremented by banks it will assist in relaxing that constraint. The major markets for engineering exports are essentially those in Europe and US and we are trying to diversify to other regions. That’s been going on and there has been a gradual improvement on that but there are trade cycles where things become difficult so one has to go back to the drawing board and recalibrate. Hence this is a great step forward as it internationalises the Indian Rupee and we have a lot of exporters in that market. As for Rupee depreciation, well it’s actually good for exporter unless there is import intensity. What everyone dealing with the external sector looks at essentially the stability of the currency vis-à-vis the West. I think the RBI is doing a great job in maintaining within a band with their interventions and buying up foreign exchange as well to stabilise their fluctuations. So long they keep it within a band it gives certainty to exporters, and for that matter importers, especially the smaller ones because they have to factor that into their pricing.
SP Sharma, Chief Economist, PHD Chamber of Commerce & Industry: Internationalisation of currencies is top on the minds of stakeholders now everywhere. It is a great development for the Indian economy. We are the fastest moving economy and our currency is as strong as compared to many other countries. From the Covid and post Covid period to the Russia-Ukraine conflict, our currency has not depreciated much as compared to others. In fact we are a bit stronger than our peers in emerging markets. India has growth, we are getting investments and good numbers in foreign exchange reserves. Still we need internalisation of currency. Approval for settlement of trade in Rupee with Russia, Sri Lanka and Maldives is in place and many others are showing interest. These countries have good demand for Indian products and India also imports some crucial raw material from these economies. So rupee transaction is required.