India is on the verge of starting bilateral foreign trade in rupees with Sri Lanka and Mauritius. Russia has already joined the wagon. Both Russia and India are opting out of choosing the dollar and euro as a currency for trade. India is in conversation with other South Asian countries for the same.
The Reserve Bank of India is moving towards the internationalisation of the Indian rupee by using it as the currency for foreign trade. India’s neighbours Bangladesh, Nepal and Myanmar have shown interest in using INR in bilateral foreign trade. After the clearance of RBI, Indian Rupee will be designated as an official foreign currency in Sri Lanka. Sri Lanka was in a severe economic crisis last year, due to which their dollar reserves have depleted. Once the Indian rupee is recognised, the country will have liquidity support. The Reserve Bank of India has given the green light for opening Vostro accounts for trade with Sri Lanka.
Since trade with Russia improved due to discounted crude and Russia being under scrutiny due to the Ukraine war, Western countries have put off the SWIFT system in Moscow. Starting trade in Indian Rupees is beneficial for Russia at this point in time.
India aims to bring together other dollar-strapped countries in this trade settlement mechanism. Apart from South Asian countries, Tajikistan, Luxembourg, Sudan and Cuba, might join Sri Lanka and Russia. Talks with the UAE are in progress.
