Indian exporters may get all the benefits for their trade settled in rupees, identical to those settled in dollars. Such a move initially aims to facilitate rupee-denominated trade with Iran.

Iran is the second-largest crude supplier to India. But with sanctions and restrictions on payment mechanisms, India is facing difficulty in settling trade with Iran. “If we give all the benefits in rupee trade, exporters and importers will not have to look for alternative payment mechanisms and we can thus boost our trade,” a senior Government official told Business Line .

He said that the proposal is being considered and a formal decision can be expected soon. However, trade with Nepal and Bhutan, where trade is settled in rupees, as also the rupee trade against the erstwhile USSR's state credit, will not be a part of the new mechanism.

Exporters settling trade in dollars get three kinds of benefits, including duty refunds, export credit guarantee for machinery and benefits under focus market schemes.

Positive impact

Reacting to the Government's move, trade bodies said the new policy will have a positive impact. Mr Ajay Sahay, Director General, Federation of Indian Export Organisation said, “This will help establish the Indian rupee as a major international currency, apart from helping trade with Iran.”

Bilateral trade between India and Iran is around $4.2 billion, largely in favour of Iran, owing to crude supplies. On the non-oil front, so far hardly any exporters have shown interest because of difficulty in the payment mechanism.

According to a source, there is at least an $8-billion opportunity in Iran awaiting the bold among India's non-oil exporters, they said. This amount is the gap left by their counterparts, including from Europe, on account of sanctions.

Indian exporters can benefit in sectors such as food items, steel, medium-density fibreboard, mining and project exports. India has pushed up its effort to increase export with Iran. A trade mission is expected to visit Iran next month.

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