The Indian government is preparing to lobby major trading partners including Japan, Iraq and Venezuela to accept rupee (INR) payments for some of the country’s exports, according to a Reuters report. The move is one of a series to stabilise the volatile currency and make it more globally acceptable.
Restrictions on large transactions of INR against foreign currencies are intended to protect India from sustained speculative assaults, but they also limit interest in the rupee and foreign investment flows.
The Reuters report cites three sources who says that a panel set up in August to study currency swaps has now won support from the finance ministry, the commerce ministry and the Reserve Bank of India (RBI) to target about 10 countries for such deals, focusing on oil exporting nations and others that run large trade surpluses with India.
The panel is likely to decide shortly on the size of the swap deals it will seek and finalise which countries to target first, according to two sources who have attended meetings. The finance ministry has already agreed in principle to lobby Venezuela to accept INR for some oil transactions. Another idea is to accept some partners’ currencies for trade.
“There is a broad agreement between the commerce and finance ministries and the RBI to push currency swap agreements, particularly with the countries with which India runs a large trade deficit,” said a senior trade ministry official quoted by Reuters.
China is already keen to start yuan-rupee trade, and India is hopeful Japan may show an interest in accepting INR payments. The idea to target oil producers Iraq and Venezuela stems from an INR payment programme already in place with Iran. However, it is unclear how much appetite there will be from the oil nations for the plan – Iran accepts INR payments only because sanctions by Western nations limit its options for payment in other currencies.
The sharp fall in India’s currency value this year and the country’s economic slowdown could discourage oil-exporting nations from making swap deals. Despite importing US$2.5bn of goods between April and September via the INR channel, Iran recently asked India to pay for oil in other currencies.
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