Why in News?
RBI data shows a sharp rise in rupee-denominated import payments, driven mainly by increased Russian crude oil purchases.
Key Highlights
- India settled imports worth ₹1.38 lakh crore (about $14.6 billion) in rupees during March-May 2026, accounting for 7.1% of merchandise imports.
- This is a sharp increase from ₹42,506 crore (2.4% of imports) in December 2025-February 2026.
- Russian crude imports reached $17.13 billion, up 30% YoY, aided by temporary US sanctions waivers.
- Rupee-settled imports have steadily increased:
- 2023-24: ₹99,680 crore
- 2024-25: ₹1.13 lakh crore
- 2025-26: ₹1.72 lakh crore
- India’s merchandise trade deficit stood at $119 billion in 2025-26.
- Benefits of Rupee Trade Settlement:
- Reduces dependence on the US dollar.
- Saves foreign exchange reserves.
- Lowers exchange rate risk and transaction costs.
- Promotes internationalisation of the Indian rupee.
- Challenges:
- Limited acceptance of the rupee by trading partners.
- Persistent trade deficits reduce the recycling of rupee balances.
Rupee Trade Settlement Mechanism (2022)
- Introduced by the RBI in July 2022.
- Enables invoicing, payment, and settlement of international trade in Indian rupees through Special Rupee Vostro Accounts (SRVAs).
- Aims to facilitate trade, reduce dollar dependence, and strengthen the rupee’s global use.
PYQ (2015, GS3, 12.5 Marks) Craze for gold in Indians have led to a surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Monetization Scheme.
[2022] With reference to the Indian economy, consider the following statements:
1. An increase in Nominal Effective Exchange Rate (NEER) indicates the appreciation of rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
[A] 1 and 2 only
[B] 1 and 2 only
[C] 1 and 3 only
[D] 1, 2 and 3