India pushes for trade in rupees to boost exports amid global trade slowdown

NEW DELHI : India and Bangladesh have agreed in principle to use local currency for trade in a boost for India’s efforts to internationalise the rupee, reduce dollar demand and cushion Indian exports amid global headwinds.

India, among the world’s fastest-growing economies, has made using the rupee in international transactions a key part of its 2023 policy on foreign trade which was unveiled on March 31.

Officials said India is ready to trade in its currency with countries that are facing a shortage of US dollars amid a slowdown in global trade.

Global trade was worth a record US$32 trillion (S$43 trillion) in 2022, but growth is set to stagnate in the first half of 2023 on the back of geopolitical tensions and concerns about inflation and high commodity prices – especially for energy, food and metals, according to the Global Trade Update, published by the United Nations Conference on Trade and Development in March.

Mr Mezbaul Haque, Executive Director and spokesman for Bangladesh Bank, the country’s central bank, told from Dhaka that the move will benefit traders of both countries.

“We have agreed in principle (for rupee transactions) and now we are working on the procedures,” he said.

“It will take a couple of months (to operationalise) because permission is required from the central bank to open an account for traders. Definitely, this will reduce the transaction cost for business, so that will encourage traders to do more business.”