India’s Ambitions To Boost Rupee Acceptance Face Challenges

India’s quest for broader international recognition of its currency seems to be facing some bumps in the road. The nation’s initiative to use rupees for crude oil imports has encountered resistance, mainly due to its trade partners’ reluctance toward this arrangement, as reported by a local news source, the Press Trust of India, referencing the country’s oil ministry.

Global oil suppliers have been hesitant about accepting rupee payments. The reasons behind their resistance are twofold: higher transaction expenses and the potential risks of foreign exchange related to the limited global acceptance of the rupee. Interestingly, not a single oil import was settled in rupees in the Indian fiscal year of 2022-2023, which ended in March, according to the country’s oil ministry.

The efforts made by India to promote the international use of the rupee are part of a broader initiative, known as de-dollarization, by several nations — including China and Brazil. These countries aim to decrease their dependency on the U.S. dollar when it comes to international payments and investments. This trend has been gathering steam as the U.S. continues to use the dollar’s global dominance to impose economic sanctions on various countries, such as Russia and Iran.

Other nations, like China and Russia, have been advocating to enhance the global use of their national currencies. Meanwhile, the BRICS group of nations (Brazil, Russia, India, China, and South Africa) is considering the idea of a shared currency. This trend is picking up with other countries getting on board, including Indonesia which recently established a task force to expand the usage of its own currency, the rupiah.

In an interesting development last year, the Reserve Bank of India (RBI) permitted local importers to create special overseas bank accounts. This change was aimed at facilitating rupee payments to their trade partners, marking the country’s relentless effort to boost the use of rupees on the international stage.