NEW DELHI (TIP): The government is planning to go for local-currency-swap deals with trading partners to lower its dependence on dollars to foot the soaring import bills. It is looking at establishing multiple arrangements with some of the country’s key trading partners — China being the primary one. Commerce Secretary S R Rao said: “We are exploring the option of trading in local currencies with select partners, somewhat like we are currently doing with Iran. It’s different from central banks’ currency swap agreements that India has with Japan and Bhutan.” In other words, the government is exploring the option of using the rupee to trade with some of its partners — an arrangement similar to that with Iran for importing crude oil. Unlike in the case of dollar-swap deals, a country enters into local-currency-swap arrangements when it intends to lower its dollar dependence.

For this, India’s focus is likely to be on BRICS countries, which have a combined forex reserve of about $4.4 trillion. The grouping had signed a swap facility last year, too. The government was now looking to have such an arrangement with China, another senior commerce department official said, asking not to be named. China has been scouting for such swap deals with some its key trade partners to promote its own currency, the yuan or renminbi, to free up its financial markets. The government is not ruling out the option of having such deals with other non-FTA countries (the countries with which India does not have a free trade agreement in place). But the real challenge would be identifying the exportable items, as India did not enjoy an edge in manufactured exports. Besides, the country had a trade deficit of around $41 billion with China, which did not gave it the comparative advantage for entering into a swap agreement, an EXIM Bank official said. At present, within BRICS, Russia and Brazil swap its currencies with China, which exports around $140 billion worth of goods and services to its trading partners. Commerce Minister Anand Sharma announced setting up an internal task force under the commerce department to “examine, study and explore” the possibility of a currency-swap arrangement with its trading partners to help stabilise the rupee. It will have representatives from the finance ministry, EXIM Bank and RBI.