India defies Trump’s Dollar diktat to accelerate rupee settlements for international trade

2 comments

1. SS: In a step to promote international trade in Indian Rupees (INR), the Reserve Bank of India (RBI) has announced that Authorised Dealer (AD) banks no longer need permission from the RBI before opening Special Rupee Vostro Accounts (SRVAs) for foreign banks. This move aims to speed up the opening and use of these accounts, helping facilitate rupee-based trade settlements.

   However, with this move, India is taking a step against US President Donald Trump, who had previously threatened to impose 100 per cent tariffs on BRICS countries if they moved ahead with their own currency to rival the US dollar. China and Russia are already trading in their local currencies, and they are also pushing to create their own currency for trade among BRICS countries.

   Trump has already slapped a 50 per cent tariff on India, citing the continued large trade of crude oil with Russia.

   In its circular issued on Aug 5, RBI highlights that this decision is effective from immediate and is extension to the previous order issued on July 11, 2022. Under this framework, exports and imports can now be invoiced and settled directly in Indian Rupees. The exchange rate between the trading partner countries will be determined by market forces, allowing for greater flexibility.

2. The issue is that nearly all other countries do not have any use for Indian Rupees. And even if they accumulate rupees, the Indian government counter productively makes it complex to invest rupees in Indian stocks and bonds with taxes and regulation.

   Unless the rupee is fully convertible, I don’t see much room for widespread usage.

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