India is in talk with small nations to trade via Rupee accounts. In this way there will be no problem related to Dollar. India is in talks with about more than dozen smaller countries as the government is seeking to expand their bilateral trades through bespoke rupee accounts and Internationalize indigenous payment modes. Indigenous payment mode involves transaction involving Rupee. The object is to bypass the dollar-denominated trades through baby steps and creating an alternative payment ecosystem other than the global SWIFT platform.
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They include African countries such as Djibouti, Zimbabwe, Malawi, Ethiopia and Sudan, said people familiar with the matter. The Reserve Bank of India (RBI), finance ministry and National Payment Corp. of India (NPCI) did not comment on the matter. the Indian Economic Trade Organization (IETO) and NPCI are primarily engageed in such cross-border dialogue before it reaches the regulators. For example, IETO help a meeting of all Common Market for Eastern and SOuther Africa (Comesa) ambassadors in Hyderabad last week. Senior ministry of external affairs and Telangana government officials were present, Madagascar also participated.
Indian Economic Trade Organization (IETO) released statement "We are engaging with a group of smaller countries which may be interested in bilateral trades via deidcated Rupee account " said Asif Iqbal, president, IETO. "We are helping to kickstart bilateral talks after which we will make a pitch for the UPI payment system involving NPCI. Such baby steps will help the rupee gain international clout gradually through non-dollar bilateral trades".
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Cereals, sugar and plastic products are part of India's trade with the South African country Djibouti. Such transactions, if routed through any dedicated rupee account, can be settled in local currencies. Djibouti's franc is equal to about half a rupee. Similarly, trade with Ethiopia, Namibia, Cuba and Kenya could be directly settled in Indian rupees against birrs, Namibian dollars, pesos and shillings, respectively.
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The RBI and NPCI will be involved in sorting out the exchange rate and payment technicalities once started partnerships between countries are agreed upon. To be sure, current trade volumes are insignificant with these smaller countries when compared with giants such as the US, UK or even Russia. But it would mark a start and grow to become potentially significant with the addition of more countries.
Sudan, which imports pharmaceutical products such as medicines, or medical products and confectionery such as snacks among other items, could settle payments directly in Rupees against it's pound. While the payment settlement mechanism with Bangladesh is being fast tracked, it has likely slipped into the slow lane with Sri Lanka due to the turmoil there. India trade in multiple items including food, oil seeds and garments with Bangladesh. However, payment settlement between rupees and the Bangladesh taka may be capped at Rs 5 lakh amid possibility of misuse.
Alongside, the Indian Authorities are also pushing for wider acceeptance of the homegrown Rupay card so that it can get Global recognition.
The above analysis has been reported on the Study IQ IAS You-Tube channel.
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