India discussing options to use rupee for South Asia trade

India’s Federal Finance Ministry is discussing options for pushing the Indian Rupee as a common currency for trade with South Asian neighbours, New Delhi based NewsRise reported yesterday quoting a senior Indian Government official.

The report filed from New Delhi said: “The Finance Ministry is trying to figure out whether we can internationalise the rupee in South Asia,” the official, who didn’t wish to be identified, told NewsRise.

Currently, only Nepal and Bhutan have the option of trading in Indian rupee. 

The Government is looking at feasibility of expanding such arrangement to Afghanistan, Sri Lanka, Maldives and Bangladesh, the official added.

Acceptance of rupee in the region as common currency for trade will likely boost bilateral trade volume and cut reliance on US Dollar to finance chronic trade deficits.

However, internationalising the rupee demands full capital account convertibility, which India has yet to adopt.

India had scrapped all restrictions on its current account in the 1990s, soon after it rolled out sweeping economic reforms, and has since been gradually easing curbs on its capital account.