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India’s Bold Currency Move Hits a Snag: No Takers for Rupee Oil Payments

India’s ambitious attempt to widen the acceptance of its currency on the global stage has encountered a significant hurdle. The nation’s recent efforts to pay for its crude oil imports in rupees, instead of the traditionally dominant US dollar, have been met with reluctance from its trade partners.

According to a report by the Press Trust of India, citing the Indian Oil Ministry, major global oil suppliers are hesitant to accept rupee payments. Their concerns stem from the higher transaction costs and foreign exchange risks associated with the rupee, a currency that, as of now, has limited global acceptance.

During the financial year 2022-2023, which ended in March, not a single oil import transaction by India was settled in rupees. This news reveals the challenge India faces in its quest to internationalize its currency.

India’s initiative is part of a broader movement known as de-dollarization, where countries including China and Brazil are striving to reduce their dependence on the US dollar in international trade and finance. This trend has gained traction in recent years, particularly as the US has used the dollar’s global supremacy to impose economic sanctions on nations like Russia and Iran.

China and Russia are also actively promoting the global usage of their respective currencies. The BRICS group, comprising Brazil, Russia, India, China, and South Africa, is even contemplating the creation of a shared currency. In a similar vein, Indonesia has established a task force to expand the usage of its currency, the rupiah.

In a strategic move last year, India’s central bank permitted local importers to open special overseas bank accounts, enabling them to make rupee payments to trading partners. This policy was a clear step towards reducing the country’s reliance on the dollar and establishing the rupee as a more prominent player in international trade.

However, the resistance from global oil suppliers highlights the challenges countries face in shifting away from established financial norms. While the movement to de-dollarize continues to gain support, India’s experience underscores the complexity and slow pace of such transitions in the global financial system.

For investors and entrepreneurs around the world, these developments in currency dynamics are worth monitoring. They signal shifting economic alliances and evolving strategies in international trade, which can have broad implications for global markets and investment opportunities.