The World Briefly

April 06, 2023

Passing on the Buck

India

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India plans to promote the use of its currency for international trade as part of a push to bolster its exports in countries that are dealing with shortages of US dollars or have been hit with Western sanctions, the Voice of America reported.

Recently, New Delhi signed a deal with Malaysia that will pave the way for trade in Indian rupees. It is also looking to trade in rupees with bigger partners, including key oil producers Saudi Arabia and the United Arab Emirates.

The ambitious initiative underscores recent efforts by India and other countries searching for alternatives to the dollar, which has dominated international trade for decades.

It also follows Western sanctions on Russia following its invasion of Ukraine, which has prompted New Delhi and Moscow to trade in currencies other than the dollar. India has not joined the US-led sanction regime and its imports of cheaper Russian crude have increased sharply in the past year.

Trade analysts said the dollar’s strength has also posed a challenge for developing nations in the past year, which have seen their import bills increase because of the strength of the dollar.

They noted that the initiative aims to support the Indian rupee as a substitute to Western currencies, as well as promote India’s trade with South Asian countries like Sri Lanka and Bangladesh – both of which are struggling with dollar shortages.

Although the effort to boost rupee-based trade is still in its early phase, the Malaysia deal and the rupee-ruble payment mechanism with Moscow will serve as test cases as to the feasibility of trading in the Indian currency.

Meanwhile, Malaysia and China voiced support this week to form an “Asian Monetary Fund” in an effort to decrease the reliance on the dollar and the International Monetary Fund, according to Bloomberg.

This story originally appeared in the April 06, 2023 newsletter, The Hero and the Strongman.