For example, in 2021-22, India’s exports to China were $21 billion while imports were $73 billion.
This will work where the volume of trade is significant between India and the other country, with a trade deficit at our end. The roubles earned will in turn be sold to those who import from Russia.
All roubles earned on exports will be channelled through the Indian government or banks that give rupees to exporters. If New Delhi signs agreements with say Russia, then trade will be in rupee-roubles. This means that for any rupee trade facility to work, governments must be involved. The system that India has recently notified asks receivers to get their banks to maintain Vostro accounts for transactions, but their balances have to be invested in government bonds, which is not attractive for manufacturers that would prefer cash to financial investments. An oil company in Russia, say, will not have much use for rupees received unless it is converted to roubles by the government. The issue here is that for rupee trade to work, it has to be acceptable to counter parties. Hence, allowing trade in rupees is a compelling option. The currency will fall, which could hasten if RBI does not sell dollars to steady the rupee. When our balance-of-payments weakens, there will be a tendency for an outflow of reserves to maintain equilibrium. There is a need to have a strong forex arsenal for sure. This is an idea whose time may have come, as countries have been exposed to a series of external forces that are not always economic. But given that such valuation changes are beyond the control of any country, the concept of trade in local currency (i.e.
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