The Department of Commerce has set up a task force to explore the possibility of using local currency for trade with major trading partners.
The purpose of the 11-member task force is limited to examine swap of national currency for trade, S.R. Rao, Commerce Secretary, clarified on Wednesday.
This was not the same as the central bank-initiated currency swap arrangements or central bank liquidity swaps.
Under liquidity swap arrangement, a currency swap is used by a central bank to provide liquidity of its currency to another country’s central bank.
The possibility of using local currency for trade is being explored in the backdrop of rising trade deficit and consequent current account deficit.
The task force will look at currency swap from the perspective of trade and this should not be construed as the regular currency swap agreements usually entered between central banks, a Department of Commerce official said.
The terms of reference for the 11-member task force include studying the pros and cons of such currency swap arrangements for India’s trade, identification of countries and implication for India’s trade and financial system.
The Task Force would be headed by Additional Secretary (trade policy division) in the Department of Commerce.
It includes a representative each from the Department of Economic Affairs and Department of Financial Services (not below the rank of Joint Secretary), Economic Advisor in the Department of Commerce, a representative each of RBI, SBI, Exim Bank and industry representative from FICCI and CII.
There will also be a representative each from the Federation of Indian Export Organisations and Engineering Export Promotion Council.
The task force has been asked to submit its recommendations to the Department of Commerce in four weeks.