India Pushes Rupee Trade Settlement to Help Partners Short of Dollars
The Union Finance Minister said on 16 October 2026 that India is promoting rupee and local-currency trade settlement. The aim is to help partner countries that are short of hard currency (widely accepted currencies like the US dollar) keep importing essential goods from India.
She spoke at an Atlantic Council event held alongside the IMF-World Bank Annual Meetings in Bangkok.
Under this approach, buyers in partner countries pay for Indian goods in rupees, so their small stock of foreign exchange is not drained further.
She said wars and geopolitical tensions have pushed several countries into debt traps and balance of payments crises (when a country cannot pay for its imports or foreign debts), and that global lenders had been slow to respond.
She also said the ASEAN-India trade agreement is tilted against India and is being reviewed, with India wanting to keep it in a revised form. She added that India stayed out of the Regional Comprehensive Economic Partnership (RCEP) because it held little benefit for India.
Local Currency Settlement (LCS) Mechanism and Internationalisation of the Rupee
Local currency settlement means two countries pay each other for trade in their own currencies instead of a third currency like the US dollar. This saves the cost of converting money twice and reduces the need for scarce dollars. Internationalisation of the rupee is the bigger goal: making the rupee widely used outside India for trade, investment and savings. For a country short of dollars, paying in rupees can be the only way to keep buying essential goods like medicines, food and fuel.
The Finance Minister's push is this mechanism used as a lifeline. Countries hit by debt and balance of payments crises can keep buying from India by paying in rupees through vostro accounts, which also widens the rupee's use abroad.
ASEAN-India Trade in Goods Agreement (AITIGA)
The ASEAN-India Trade in Goods Agreement (AITIGA) is a trade deal under which India and the ten ASEAN (Association of Southeast Asian Nations) countries cut or remove tariffs on most goods they trade. It is the "goods" part of the wider ASEAN-India Free Trade Area. Since India's imports from ASEAN have grown much faster than its exports, India pushed for a review to update the deal.
The Finance Minister's remark that the agreement is tilted against India reflects the trade deficit and routing problems behind the review. India's stated aim is not to exit but to keep the deal in a reworked form.
Regional Comprehensive Economic Partnership (RCEP)
The Regional Comprehensive Economic Partnership, or RCEP, is a free trade agreement among 15 countries of the Asia-Pacific: the ten ASEAN members plus China, Japan, South Korea, Australia and New Zealand. Its members agree to remove import taxes on most goods traded among them and to follow common trade rules. Together, these countries make up about 30% of the world's GDP and about 30% of its population, so it is often called the world's largest trade bloc by these measures. India took part in the talks for seven years but pulled out in November 2019 and is not a member.
The Finance Minister said India stayed out of RCEP because it offered little for India. Her remarks link the RCEP decision to India's broader trade strategy: reviewing AITIGA, signing bilateral deals and promoting rupee settlement, rather than joining a China-heavy regional bloc.
- Date of remarks: 16 October 2026, at an Atlantic Council event on the sidelines of the IMF-World Bank Annual Meetings, Bangkok
- RBI framework for rupee trade settlement: 11 July 2022, through Special Rupee Vostro Accounts (SRVAs)
- Local currency settlement MoUs: UAE (July 2023), Indonesia (March 2024), Maldives (November 2024), Mauritius (March 2025)
- AITIGA: signed 13 August 2009; in force 1 January 2010; under review since May 2023
- RCEP: 15 members; signed 15 November 2020; in force 1 January 2022; India left on 4 November 2019
- India-China trade deficit: $99.2 billion (2024-25)