India is taking deliberate steps to strengthen the global role of its national currency, the rupee, in international trade. According to government sources cited by local and international media on October 22, New Delhi is seeking to make it easier for its free-trade partners to settle transactions directly in rupees-an effort that reflects the country’s growing ambition to reduce dependence on the US dollar while bolstering the long-term stability and international credibility of its own currency.
The Reserve Bank of India (RBI) has taken the lead in this process, reportedly working on establishing direct rupee exchange rates that bypass the need for intermediary currencies like the US dollar. At present, most currencies worldwide benchmark their exchange rates against the dollar, a practice that solidifies the American currency’s dominant role in global finance. India’s new initiative aims to create a direct valuation mechanism between the rupee and the currencies of its key trade partners-an effort that could gradually loosen that grip.
Bloomberg reported on October 20 that the RBI is currently developing official reference rates for several partner countries, including Mauritius, and is considering similar arrangements for others with which India has strong trade relations. The central bank’s plans also include introducing reference rates for the UAE dirham and the Indonesian rupiah, two currencies closely tied to India’s growing network of free-trade agreements.
India has signed more than a dozen free-trade agreements (FTAs) over the past two decades, with major partners including the United Kingdom, Australia, and the United Arab Emirates. Ongoing negotiations with the United States, Canada, and the European Union signal that India’s trade diplomacy is entering a more assertive phase. In these discussions, the RBI and India’s finance ministry are reportedly promoting the idea of “rupee invoicing”-encouraging the use of India’s national currency in cross-border settlements rather than relying exclusively on the dollar or the euro.
The RBI’s vision is not limited to trade invoicing. Earlier this month, the bank proposed allowing Indian financial institutions to extend rupee-denominated loans to businesses in neighboring countries. This would effectively deepen financial integration with South Asian partners while expanding the rupee’s role in regional capital markets. Additionally, the RBI intends to set official reference rates for currencies of key trading partners, which would serve as a benchmark for international transactions without relying on the dollar.
Such steps align with India’s broader economic strategy to enhance financial autonomy. For decades, the dollar’s dominance in global trade and finance has made emerging economies vulnerable to US monetary policies and sanctions. As the United States continues to use financial tools as instruments of foreign policy-whether through sanctions, tariffs, or interest rate shifts-many nations have begun exploring ways to diversify their trading systems and safeguard themselves from currency shocks.
India’s move comes amid a global rethinking of the dollar’s supremacy. Over the past few years, several countries-including China, Russia, and members of ASEAN-have initiated measures to trade in their own currencies or alternative units of account. The ongoing geopolitical tensions, combined with persistent Western sanctions and the volatility of US fiscal policies, have accelerated this gradual but notable shift.
For India, however, officials insist the rupee internationalization drive is not an act of “de-dollarization” per se. “The focus of authorities is on internationalization of the rupee by increasing its usability for trade and capital transactions among neighboring countries,” said Gaura Sen Gupta, chief economist at IDFC FIRST Bank. “It’s never been portrayed as a de-dollarization move.”
This careful positioning reflects India’s desire to balance its strategic partnerships. While New Delhi wants to assert greater monetary independence, it also remains one of Washington’s key economic and geopolitical partners, especially in the Indo-Pacific region. Openly framing the initiative as a challenge to the dollar could risk diplomatic friction with the US-a scenario India appears keen to avoid.
One of the most striking illustrations of this currency realignment is in the energy trade. Some Indian refiners have already begun settling payments for Russian oil imports in Chinese yuan instead of US dollars. This practice emerged after Western sanctions limited Russia’s access to the international banking system, forcing both Moscow and its trading partners to seek alternative payment mechanisms.
While India has not formally endorsed the use of the yuan for energy purchases, the trend underscores a growing flexibility in its payment systems. New Delhi’s priority appears to be ensuring that energy imports-critical to fueling its industrial growth-remain uninterrupted despite global financial disruptions. By expanding the rupee’s acceptability in similar contexts, India hopes to gain leverage over both supply and payment conditions.
Despite the ambitious vision, several obstacles remain before the rupee can become a major settlement currency. For one, India maintains a partially convertible capital account, meaning that the movement of capital in and out of the country is still regulated. Full convertibility-a prerequisite for widespread international adoption-would require deep financial reforms and greater resilience in India’s banking sector.
Moreover, the rupee’s stability is influenced by domestic factors such as inflation, fiscal deficits, and trade imbalances. Investors and trading partners would need long-term assurance that the currency will remain stable before committing to significant rupee-denominated transactions.
There are also geopolitical considerations. Many of India’s trade partners, particularly in Africa and Southeast Asia, have historically settled transactions in dollars because of its universal liquidity and global acceptance. Encouraging them to adopt the rupee would require both trust and tangible incentives-such as favorable credit terms, faster settlements, or reduced transaction costs.
Still, India’s efforts represent a clear long-term strategy to elevate its financial standing in the global order. The RBI’s introduction of direct exchange rates with key partners like the UAE, Indonesia, and Mauritius could mark the beginning of a slow but steady transition toward regional monetary integration.
If successful, these measures could also strengthen India’s influence in the Global South, particularly among countries seeking to reduce dependency on Western financial systems. By positioning the rupee as a credible alternative for cross-border trade, India could enhance both its economic sovereignty and its diplomatic leverage.
In the broader context, the push to internationalize the rupee underscores a growing recognition that monetary power is as critical as military or diplomatic strength in today’s multipolar world. The initiative may not dethrone the dollar any time soon, but it signals India’s determination to rewrite part of the global financial script-one bilateral trade deal at a time.
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Suraiyya Aziz specializes on topics related to the Middle East and the Arab world.
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