India is in the final stages of negotiations with a number of countries to settle trade in rupees. Home Minister Amit Shah said in an interview with the Economic Times that the measure will be a priority in the coming days, adding that the matter is on hold due to the ongoing Lok Sabha elections.
That would be the biggest step forward, he said.
Finance Minister Nirmala Sitharaman recently said that many countries are negotiating to start trade in the rupee as the country's fundamentals are strong and the Indian sector is “mostly stable” against most international currencies. He said there was.
“The Indian rupee has been fairly stable against most international currencies, with the exception of the US dollar, which has been volatile. But even then, compared to many other currencies, the Indian rupee is far more stable against the US dollar. Therefore, today countries want to build trade relations based on rupee trade.
Rupee invoicing has become a buzzword after the July 2022 RBI circular allowing invoices, payments and settlement of trade (exports and imports) in Indian Rupees.
India started trading with neighboring countries like Nepal and Bhutan in rupees. The Rupee Trade Mechanism was launched to facilitate domestic currency trade with Russia and Sri Lanka included the Rupee in the list of designated foreign currencies.
India has a huge market size and a population that can be produced by a middle class with purchasing power. And by 2047, the number of middle class members could be between 120 million, Sitharaman added.
“India is taken seriously only because its economy is much more stable. Its tax policy is much more predictable and its system is much more transparent… India has received the highest amount of FDI of over $600 billion and reserves are also increasing”…As the economic fundamentals are absolutely stable and strong, people are They take us seriously, they want to engage with us, and they give us a position where they are willing to listen to India's suggestions. ” she said.
This will help internationalize the rupee besides reducing transaction costs, price transparency, faster settlement times, lower hedging costs and lower cost of holding foreign exchange reserves by the RBI.
