Brazil, South Africa next in India's bilateral currency settlement plan
After agreements with United Arab Emirates (UAE) and Indonesia, India is considering the possibility of establishing bilateral agreements with important partners in Latin America and Africa to bolster trade using local currencies, thereby contributing to the broader goal of internationalizing the Indian rupee, Moneycontrol reported.
A government official has indicated that countries like Brazil, Argentina, South Africa, Senegal, and Tanzania are potential candidates for India's initiative to settle transactions in local currencies.
The strategy involves initially approaching smaller nations to encourage them to accept payments in rupees for various 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,” an official told Moneycontrol on the condition of anonymity, adding that the plans are initial and would require discussions.
With Brazil and Tanzania, New Delhi maintains a trade surplus of $3.25 billion and $1.39 billion respectively, according to data from the commerce ministry for the year 2022-23. Similarly, with South Africa, Senegal, and Argentina, the trade deficit is minimal at best, as per the same data period.
India's primary exports to these countries encompass various categories, including petroleum products, engineering goods, pharmaceuticals, and rice.
On the import side, India traditionally sources edible oils from both Brazil and Argentina, while also procuring substantial amounts of fertilizers, cotton, and toys from South Africa. Additionally, Tanzania and Senegal are important partners in meeting India's demands for gems and jewellery, said the report.
Recently, New Delhi has taken significant steps in this direction by entering into a memorandum of understanding (MoU) with the UAE.
This agreement aims to use the rupee and the dirham for conducting bilateral transactions. Discussions over a local currency settlement strategy were held with Indonesia. These talks occurred on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Gandhinagar in mid-July, said the report.
India is reportedly considering the inclusion of Bangladesh and Sri Lanka in its local currency settlement plan. These neighbouring countries are currently facing currency shortages, making them potential candidates for such arrangements.
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