An inter-ministerial panel headed by Union Minister for Commerce and Industry Suresh Prabhu suggested that India could set up a rupee-renminbi payment mechanism for trade with China. It also suggested that India could go into barter trade for its oil purchases with countries like Iran, Venezuela and Russia.
The panel, including officials of 16 departments and ministries, met to reduce India’s dependence on imports and expand domestic capacity to produce inputs through non-tariff measures.
Mr Prabhu tweeted, “Directed key ministries to examine measures on diversification of export base and increase domestic production in order to promote economic growth and address our merchandise trade deficit.”
The panel has asked the department of economic affairs and Reserve Bank of India to look at arrangements for import on deferred payments or increase in barter system with countries like Russia for a balanced trade.
India had the highest trade deficit with China of over $63.04 billion in 2017-18. India can explore the feasibility of a rupee-renminbi trade with China.
“It was also suggested to accept any country’s proposal that is willing to trade in euro and rupee,” an official said.
As a result of trade tensions between US and China, the World Trade Organisation downgraded global trade growth from 4.2 percent to 3.9 percent.
Suresh Prabhu on Monday, in a meeting with secretaries of various departments, asked them to fine-tune the government’s export strategy. The commerce ministry is focusing on nine sectors—gems and jewellery, leather, textile and apparel, engineering, electronics, chemicals and petrochemicals, pharma, agriculture and allied and marine products—to boost exports.
The increase in India’s import bill and the widening of the current account deficit (CAD) has resulted due to weakening rupee coupled with a rise in global crude oil prices. India’s CAD in the June quarter of FY 2019 rose to a four-year high of 2.4% of GDP, exerting further pressure on the weakening rupee.
Suresh Prabhu suggested ways to ease the pressure on the CAD by increasing remittances, external commercial borrowing, foreign loans and foreign direct investment to immediately improve capital inflows.