India’s new Foreign Trade Policy (FTP) unveiled on Friday will “encourage” international trade settlements in rupees, two senior officials from the Ministry of Commerce have stated.
“If there are countries where there is a currency failure, or they are having dollar shortages or international currency shortages, we are willing to trade in rupees with them,” Commerce Secretary Sunil Barthwal said.
Barthwal noted that the trade rupee will “disaster-proof” those countries' economic contingencies, like currency shortages, while the rupee trade mechanism will also help Indian exporters since it won’t disrupt their exports in the case of an economic crisis.
He added that promoting the use of the international rupee is one of the new trade policy's major “dimensions”.
Santosh Kumar Sarangi, Directorate General of Foreign Trade (DGFT), noted that the government was involved in efforts to “internationalize” the rupee.
“The changes required to facilitate the international trade settlement in rupee have already been provided for… these would be taken forward and encouraged…” stated Sarangi.
Toppling Dollar Hegemony
Since last year, New Delhi has been involved in coordinated efforts to carry out trade settlements in local currencies other than the US dollar.
These efforts coincide with ongoing geopolitical tensions between the West and Russia, with the G7 imposing economic sanctions against Moscow and excluding it from the SWIFT network.
Last July, the apex Reserve Bank of India allowed foreign exporters to open ‘special Vostro’ accounts in Indian banks, a move aimed at circumventing trade in the greenback and subsequently the US-led Western sanctions.
New Delhi said this year that it had approved trade in local currencies with 18 countries, a list that includes Russia, Iran, and Saudi Arabia.
India Sets $2 Trillion Export Target
The new FTP also aims to achieve a goods-and-service trade target of $2 trillion by 2030, Commerce and Industry Minister Piyush Goyal said.
Goyal underlined that the Commerce Ministry's tentative data showed that goods and services exports have already crossed the record of $750 billion for 2022-23.
Commenting on the $2 trillion target, the head of DGFT said Indian exports have been growing at a faster pace than the global average, despite all the geopolitical tensions, post-COVID economic stress, and recessionary pressure that advanced economies are facing.
Sarangi said that India’s engineering, agricultural, and pharmaceutical exports were driving the growth in trade. In this regard, the Indian economy was projected to grow by 6.5% in 2023-34 fiscal, which begins on 1 April.
The Indian official noted that the increase was much more than the global GDP growth projections for the upcoming year.