Trade invoicing in INR: Some thoughts
Most of our trade is invoiced in Freely Convertible Currencies (FCC) such as Euro (around 8% of total), Pound (3%), Yen(0.5%) or USD ( 87%). In fact, to become eligible for benefits under our Foreign Trade Policy, one has to realize the export proceeds in FCC 'only', as per para 2.4 a of FTP (ignoring minor arrangements through Vostro/Nostro/ACU and Nepal/Bhutan trade) The questions are: why do we have this practise? Is it good? What if we tweak it and allow people to inovice and realize the money in INR and let them avail the benefits of FTP. And what determines the invoicing currency in international trade to start with? Will traders rush to invoice in INR if they are allowed to? And so on. We have this practice of invoicing/realizing in INR because our currency is not an international currency. Till we become fully convertible, it is not easy to be an international currency. Importers cannot (generally) ask the quote in INR as the exporters from abroad cannot hed