In mid-August, India’s rupee declined to an all-time low of 70 INR per US dollar, placing it among the worst performing emerging market currencies. Indian Economic Affairs Secretary Subhash Chander Garg attributed the historic fall to external factors.
New Delhi may pay in yuan for some Chinese imports in the near future in order to resolve its losses in trade due to the plummeting exchange rate of the rupee against the dollar, Bloomberg cited unnamed sources as saying.
They added that India’s plan is expected to add to “direct convertibility” between the rupee and the yuan.
“The proposal would allow Indian exports of pharmaceuticals, oilseeds and sugar to China to be settled in rupees, while keeping out trade in high volume products such as electronics,” the sources pointed out.
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They added that India, which remains a net importer of oil, wants to save on dollars to pay for increasing crude costs by allowing Indian importers to pay for Chinese goods in yuan.
As far as China is concerned, New Delhi’s plan is due to bolster the yuan’s international clout amid an ongoing BRICS group (Brazil, Russia, India, China and South Africa) discussion to switch to the Chinese national currency in trade.
In mid-August, India’s Economic Affairs Secretary Subhash Chander Garg claimed that the rupee is “depreciating due to external factors” while stressing that there is nothing to worry about at this stage.
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The Indian currency has fallen more than 8.6 percent this year, in what placed the rupee in the list of worst performing currencies from emerging nations.
Earlier, JP Morgan economist Sajjid Chinoy suggested that the fall in the rupee is a consequence of the trade dispute between the US and China.
“Six of the worst performing currencies against the dollar in the last 10 days are Asian. So, this is very much reflecting the regional fallout from a tariff war between China and the US. That is the backdrop here,” he noted.