India is considering the possibility of forming bilateral agreements for trade deals using local currencies with important partners in Latin America and Africa. Following in the footsteps of agreements with the United Arab Emirates (UAE) and Indonesia, this approach aims to facilitate trade while aligning with India’s objective of internationalizing the rupee. A government official mentioned this development to Moneycontrol.
According to the official, nations such as Brazil, Argentina, South Africa, Senegal, and Tanzania are likely to be the next set of nations for India’s bilateral local currency settlement push, as the country plans to convince smaller countries first to accept payment in rupees for transactions.
“If we have to push rupee trade, we have to start with smaller nations where it would be easier to give a push rupee internationalisation,” the official said on condition of anonymity, adding that the proposals are preliminary and would require further discussions.
As of 2022–2023, New Delhi has a trade surplus with Tanzania and Brazil of $1.39 billion and $3.25 billion, respectively. According to data from the commerce ministry during the time period, the trade deficit with South Africa, Senegal, and Argentina is minimal.
According to previous reports by Moneycontrol, the Indian government’s choice of partners for its bilateral currency settlement plan will be based on the possibility to increase trade as well as balance the trade difference between the two nations. India either has a small trade deficit or a trade surplus with African and Latin American nations.
The main items that India exports to these countries are grains, engineering goods, pharmaceuticals, and petroleum products. While Brazil and Argentina are the primary import sources for India’s needs for edible oil, India also imports fertilisers, cotton, and toys from South Africa. Senegal and Tanzania are crucial in meeting New Delhi’s demands for diamonds and jewellery
New Delhi signed a memorandum of understanding (MoU) with the UAE last month In order to use the rupee and the dirham to settle bilateral transactions. A local currency settlement plan was also discussed with Indonesia during talks between the two countries on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Gandhinagar in the mid-July
According to reports, India is also considering Bangladesh and Sri Lanka for its local currency settlement plan as the two neighbours are experiencing a currency shortage.