China News Service, July 14 (Zhang Naiyue) On the 11th local time, the Reserve Bank of India launched a new mechanism for international trade settlement in Indian rupees, and announced that it will take effect immediately.

　　India's "bold" approach has attracted attention from the outside world, and the motivation behind it is even more thought-provoking.

Why did the world's sixth largest economy suddenly launch a rupee settlement mechanism for international trade?

Is it a challenge to "dollar hegemony", or is it imitating Russia's "ruble settlement order"?

Data map: Rs.

Why does India push the rupee settlement mechanism?

　　According to the official website of the RBI, all import and export trade can be settled and invoiced in rupees under the condition of rupee settlement of international trade.

　　Through this mechanism, Indian importers can pay overseas sellers in rupees, while Indian exporters exporting goods and services will be able to receive proceeds in rupees from a special account designated by the correspondent bank of the partner country.

　　According to the RBI, the mechanism was launched to boost global trade growth, increase interest in the Indian rupee in the global trade community, and boost Indian exports.

　　The chairman of the Federation of Indian Export Organizations also said that India's move "will help our importers and exporters" at a time when many countries are facing foreign exchange shortages and is "a recognition of the status of the Indian rupee as an international currency."

Challenge the hegemony of the dollar?

Or for oil and exchange rates?

　　Currently the most widely circulated currency in international trade is the US dollar.

In the eyes of many people, India's move is quite a challenge to the "dollar hegemony".

　　But many media and experts believe that the mechanism is actually India's latest move to stabilize the rupee exchange rate.

　　Recently, due to the rising prices in the international commodity market, India's trade deficit has continued to expand, foreign exchange reserves have been rapidly depleted, and the exchange rate of the rupee against the US dollar has continued to be under pressure.

The rupee has lost more than 6.4 percent against the dollar since 2022.

　　India chose to launch this settlement mechanism when the rupee fell to a historical low, no doubt to curb foreign exchange demand and thus achieve the purpose of supporting India's national currency.

Data map: Indian Prime Minister Narendra Modi.

　　In addition, there are also views that the rupee settlement of international trade is to promote trade between India and Russia and with neighboring countries.

　　Since the outbreak of the Russian-Ukrainian conflict, Western countries have imposed a large number of sanctions on Russia, which has led to poor export channels for the latter.

Against this backdrop, India has been taking advantage of the opportunity to increase imports of Russian oil.

In addition to obtaining oil at a lower price, India can also process the oil into diesel fuel and ship it to the European market for a profit.

　　Therefore, maintaining the oil trade with Russia makes a lot of sense for India.

The chairman of the Indian Engineering Export Promotion Council (EEPC) pointed out that the establishment of a rupee international trade settlement mechanism is convenient to eliminate the risk of the US dollar exchange rate, and can also promote trade with Russia and other sanctioned countries.

Rupee internationalization?

"easy to say, hard to do"

　　Regardless of the motive, India has its own "small abacus" to launch a rupee settlement mechanism, but what challenges will this bold decision face in the future?

　　Reuters quoted Barclays Bank chief India economist analysis as saying that in the long run, this measure will make the rupee more used in foreign trade, "for neighboring countries, as well as those who intend to use the rupee in settlements for trade diversification. It is very beneficial for countries that have standardized their monetary bases.”

　　However, on the issue of feasibility, this mechanism has been questioned.

"India Today" reported that the rupee is not a widely circulated currency in international trade like the dollar and the euro, and its internationalization is "easier said than done".

　　India's "Business Standard" quoted experts as saying that although India can conduct rupee-dominated trade with sanctioned countries, getting countries to participate - "depends on diplomatic skills."

　　The analysis said that this measure may be a win-win for India-Russia trade, but diplomatic relations with India will determine whether other countries can participate in such settlements.

　　Second, a large inflow of funds could cause fluctuations in the value of the rupee and could make it difficult for the RBI to set monetary policy.

　　Moreover, for the rupee to truly become a trade currency, India needs to start exporting more products to other countries and become a "manufacturer", which is not something that can happen overnight.

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