India has launched its new Foreign Trade Policy (FTP) 2023, with a special focus on settling international trade in Indian rupee. The move is aimed at making the rupee a global currency, while also protecting the country from global shocks. The policy was launched on March 31 by the central government, with changes made to the grant of export benefits and fulfilment of export obligations for export realisations in the Indian currency, in accordance with RBI norms.
India’s Efforts to Make Rupee a Global Currency
The Indian government has been making efforts to make the rupee a global currency for some time now. The new FTP 2023 is a step forward in this direction, as it allows settlement of international trade in rupee. This move will not only help India in its efforts to promote the use of the rupee in global trade but also make it less vulnerable to global shocks.
Rupee Trade as an Alternative for Countries Facing Dollar Shortage
Commerce Secretary Sunil Barthwal, during the launch of the policy in New Delhi, announced that India will offer its currency as an alternative for trade to countries that are facing a shortage of dollars in the wake of the sharp tightening in monetary policy by the US Federal Reserve. This will help countries facing currency risk to disaster-proof themselves. Sri Lanka, Bangladesh and Egypt are among the countries that have already shown interest in trading in the Indian currency.
Allowing Export Contracts and Invoices to be Denominated in Indian Rupee
Under the new FTP 2023, all export contracts and invoices will now be allowed to be denominated in Indian rupee. This will make it easier for Indian exporters to do business in their own currency, thereby reducing their reliance on foreign currency. Export proceeds may also be allowed in rupees, provided it is done through a Vostro account. This move will also make it easier for Indian exporters to comply with RBI rules regarding invoicing, payment and settlement of exports and imports in rupee.
Availing Export Benefits and Incentives with Export Proceeds in Indian Rupee
The new FTP 2023 also allows for export proceeds in Indian rupee against exports to Iran to avail export benefits / incentives, at par with export proceeds realised in freely convertible currency. This will encourage Indian exporters to do business with Iran in rupee and help promote the use of the Indian currency in global trade.
Conclusion
India’s new Foreign Trade Policy 2023 is a significant step forward in its efforts to make the rupee a global currency. By allowing settlement of international trade in rupee and promoting its use in global trade, India is insulating itself from global shocks and reducing its reliance on foreign currency. The move will also benefit Indian exporters, who will find it easier to do business in their own currency and comply with RBI rules.
