In a bid to expand the use of the local currency in global trade, India recently eased its rules on exporting in rupees. The move follows US President Donald Trump’s warning to BRICS countries against taking any steps to challenge the dollar, including the creation of an alternative currency.
The Directorate General of Foreign Trade (DGFT) amended the Foreign Trade Policy (FTP) 2023 on Wednesday, allowing export contracts, invoices and payments to be settled in either Indian rupees or foreign currencies.
Earlier, exporters typically had to realise export proceeds in freely convertible currencies, with rupee receipts recognised only in limited cases. The new rules formally put rupee realisations on par with foreign‑currency earnings for most non‑ACU markets
The list excludes the Asian Clearing Union (ACU), which includes of Iran, Maldives, Myanmar, Pakistan, Bangladesh, and Sri Lanka. These countries still have to use an ACU-determined currency. Rupee receipts from Nepal and Bhutan are not included in this, and they continue to have separate rules.
The change aligns with a regulatory process that began in July 2022 when the RBI allowed the use of Special Rupee Vostro Accounts (SRVAs) to facilitate Indian rupee transactions.
The policy is expected to help trading partners facing dollar shortages or sanctions, by giving them an INR‑based alternative to settle trade. Exporters can also eliminate hedging costs (expensive currency insurance) to protect themselves against sudden swings in dollar value.
Exporters who choose to invoice and settle entirely in rupees may see lower hedging needs, but firms that continue to bill in dollars will still experience FX‑driven gains or losses as before.
However, the move might be disappointing to some businesses, as export payments in US Dollars combined with a depreciating rupee often give them a bonus. Rupee-denominated exports will eliminate this currency bonus, as a weaker rupee will no longer increase the value of their earnings.
For example, if an exporter is owed $1,000, they would receive ₹95,720 at an exchange rate of ₹95.72. If the rupee depreciates further to ₹97 against the dollar, they would receive ₹97,000 for the same product, giving the exporter a bonus of ₹1,280.
Hence, companies in high-margin export sectors like IT, textiles and pharmaceuticals might no longer see automatic profit boosts during global market shifts.
However, this will only be the case if the rupee is widely used in the export transaction. Experts raise concerns that overseas buyers might face trouble in obtaining the currency. Banks outside India might not be willing to hold Rupees and transact in them.
