International Trade Settlement in Indian Rupees (INR)

International Trade Settlement in Indian Rupees (INR)

Recently, India officially launched the rupee settlement mechanism for international trade. The mechanism stipulates that Indian importers need to pay in rupees according to overseas sellers' invoices for the supply of goods or services, and Indian exporters also need to obtain export earnings in rupees from a special account designated by the correspondent bank of the partner country. International offshore exchange rate determination.

Simply put, when other countries buy Indian goods, they must first exchange foreign currency for rupees, and when India buys goods from other countries, the other party also needs to accept rupee transactions. Before implementing this mechanism, AD Bank should obtain prior approval from the Mumbai Central Office, Foreign Exchange Department, Reserve Bank of India.

Indian media said that this measure was taken for the first time in Indian history, but it was not known how effective it was. Since the introduction of this policy, some people have found that in addition to "paying in rubles for international loan repayments (one of Putin's financial policies)", the Russian model is almost copied, indicating that the Modi government also hopes that the rupee will soar in value like the ruble. This behavior is undoubtedly a challenge to the U.S. dollar settlement system for international transactions, which will make the “harvesting ability” of the U.S. currency worse, and can also pose a challenge to the U.S. dollar’s hegemony.

However, some people reminded that all the premise is that India can insist on international settlement in rupees for a long time, and the government also needs to enforce control, and cannot rely on the "spontaneous patriotism" of businessmen.

It is worth mentioning that some economists are not optimistic that India will follow Putin's "ruble settlement model".

They believe that there are at least two prerequisites to achieve the same success as the Russian currency:

One is that Russia has "hard currency" resources, grain, fertilizer and natural gas that are exported to the world, which forms an absolute seller's market. Compared with this, India has few irreplaceable export goods, and it is forced to settle in rupees or even. will lose customers;

The second is that if the rupee settlement order really has a certain impact on the dollar system, India will inevitably be threatened by sanctions from the United States. Russia is now almost "immune" to all aspects of the United States' sanctions, and India's fragile foreign trade economy will come to the fore. It is also very difficult to counter US pressure.

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