The Indian government has announced that it will facilitate the settlement of international transactions using its national currency, the rupee. As part of its foreign trade policy implemented on April 1st, the country introduced this measure to facilitate payments to countries with a falling US dollar.
India to offer rupee-based settlement options for international trade
The Indian government is introducing new settlement methods other than US Dollar for international trade. The new foreign trade policy guidance, implemented on April 1, includes a new option to settle payments in Indian Rupees, giving countries facing a drop in the US dollar a way to continue doing business with the country.
The new directive would aim to help countries such as Sri Lanka, Bangladesh and Egypt, which are struggling to obtain US dollars to continue exchanging goods with India. Commerce Secretary Sunil Barthwal said the move would help those countries hedge disaster against a hypothetical dollar drought.
The move is part of New Delhi’s efforts to profile its currency globally. In this sense, the Indian Department of Commerce explained that this new foreign trade policy plan is designed to “work towards making the Indian rupee a global currency, adding further impetus to India’s emergence as a world trading center”.
Countries moving away from US dollar hegemony
India is the latest in a list of countries that have taken some steps to move away from using US dollars, at least for international business. China, which is part of the BRICS bloc, which is also integrated with India, Brazil, Russia and South Africa, has also been promoting the use of the Chinese yuan as part of an international policy of de-dollarization.
At the meeting between Chinese President Xi Jinping and Russian President Vladimir Putin as part of 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. Also, more recently, China signed an agreement with the Brazilian government to get rid of the dollar in its bilateral agreements, replacing it with national currencies.
Other blocs are also contemplating ways to lessen their reliance on the US dollar. ASEAN, the Association of Southeast Asian Nations, a bloc that includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, is pressuring its members to use national currencies for payments, as those who fear the US secondary sanctions for failing to impose a trade ban on Russia.