The government has encouraged large oil exporters to accept the rupee to settle trades, while the RBI has allowed banks in 18 countries to open special accounts to settle transactions in rupees. But progress on turning the rupee into a hard currency has been slow so far.
The rupee settlement of trade between India and the UAE assumes significance, given that the two countries signed an MoU in July 2023 to set up a framework to use their respective local currencies to settle bilateral transactions.
Oil Imports: With the nation more than 85% dependent on imports for meeting its oil needs, India has been pursuing a three-pronged strategy of buying from the cheapest available source, diversifying sources of supply and not breaching any international obligation like the price cap in case of Russian oil.