India pushes rupee trade settlements to help forex-starved nations

Finance Minister Nirmala Sitharaman said India wants to expand rupee-based trade settlements to help countries facing hard-currency shortages. She also called for changes to the India-ASEAN trade agreement, saying it was skewed against India, and defended the decision to stay out of RCEP.

New Delhi: India wants to promote trade settlements in rupee to help partner countries facing a shortage of hard currencies so that they continue importing essential goods, Finance Minister Nirmala Sitharaman said on Friday.

When countries struggling to access hard currencies often face difficulties in maintaining trade despite their need to import goods, local currency settlements could help address the problem, she said in an interaction with the Atlantic Council on the sidelines of the IMF-World Bank annual meetings at Bangkok, Thailand.

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“One of the things that we in India want to do is settle in rupee, whatever the payment is to be done by those countries which import goods from us,” she said.

She said India was working to facilitate settlements in rupee to ensure that trade continued with countries facing foreign currency constraints.

“Rupee and local currency settlements are something which we want to do for the benefit of countries which are starved of hard currencies but yet need to import some goods, and, therefore, rupee trade is trying to make it possible…for local currency settlements to keep trade going,” she said.

“It is a method we have understood and are working on it,” she added. She said this mechanism was also developed against the backdrop of increasing economic downturns affecting nations in many adverse ways. Increasing geopolitical tensions, including wars, had pushed many countries into a debt trap and balance of payments crisis, she added.

Multilateral development institutions took years to respond to these problems, as much as three to four years and these kinds of things are getting corrected now, she added.

On multilateralism, Sitharaman also said India is pushing for more meaningful bilateral relationships.

India is making progress in many trade agreements, which are strengthening its partnerships, she said.

However, she said, with regard to India’s trade agreement with the Association of Southeast Asian Nations (ASEAN), it is skewed against New Delhi.

“The trade agreement we have with ASEAN countries, we are not against ASEAN benefitting from it, but it is very skewed against India,” she said.

“If it favours ASEAN, we are happy for it, but we would equally want to address concerns which we as importers are facing, our markets are facing, our manufacturers are facing,” she said.

The two sides are reviewing the agreement, and India wants to carry on with the agreement but in a “slightly refashioned manner,” she said.

India has also consciously stayed out of the Regional Comprehensive Economic Partnership deal, involving 16 economies across Asia and the Pacific, as the deal did not have anything to offer for India, she added.

While India continues to trade with those member countries, getting into the agreement would not be in India’s favour, Sitharaman said.

India had withdrawn from the Regional Comprehensive Economic Partnership in November 2019 due to fears of cheap imports, particularly from China, mounting trade deficits, and a lack of adequate protection for domestic industries and agriculture.