Rupee flexes its muscles in India’s new trade play

The Government of India has revised the Foreign Trade Policy (FTP) 2023 to facilitate exporters by allowing them to invoice overseas sales and receive payments in Indian rupees. This amendment, effective for all exports, aims to align rupee receipts with foreign-currency earnings in terms of FTP benefits and export obligations. The Directorate General of Foreign Trade (DGFT) emphasized that this change applies to all countries, including those in the Asian Clearing Union (ACU), Nepal, and Bhutan.

For ACU member countries, Bangladesh, Iran, Maldives, Myanmar, Pakistan, and Sri Lanka, export contracts must use a currency determined by the ACU. Nepal and Bhutan, however, require contracts to be denominated and settled in Indian rupees or as per RBI directions. Iran, while covered under ACU rules, still adheres to specific provisions related to sensitive goods and technologies.

The amendment ensures that rupee payments received through approved banking channels are treated equally to foreign currency payments, removing uncertainties for exporters. This move is expected to reduce currency conversion costs and exchange-rate risks for exporters, potentially paving the way for wider international use of the rupee in trade settlements.