China does not accept India’s proposal for bilateral trade between the two countries to be done in their national currencies. Beijing refused this option which was intended to be used as a measure against the ever-increasing trade deficit with India. India’s exports to China in 2017-18 amounted to only USD 13.5 billion, while import volumes are about $76.4 billion, leaving a huge $63 billion trade deficit. For 2016-17 period, it was also enormous (51.1 billion dollars), but now it is growing even more.

India has offered China to use their domestic currencies in order to boost their exports and cope with the increasingly expanding gap. The issue was discussed at high-level meetings in October. It was then suggested that the Banking Reserve of India (India’s National bank) and the Department of Economic Affairs would consider the possibility to trade with China in INR and RMB alone.

The renminbi is the official currency of the People’s Republic of China. Far more familiar to us is the yuan as a basic unit in renminbi, but it is also used as a synonym of the currency. In 2012, renminbi/yuan is the ninth most traded currency in global exchange markets with a share of 2.2 per cent.

In turn, the history of Indian rupee is being tracked back to Ancient India in the middle of VI century BC., which is considered as one of the earliest countries that have released coins in circulation. In recent times, however, Indian rupee with Indonesian rupee are two of the worst performing Asian currencies. The Indonesian rupee has hit its bottom low from 1998, while the Indian rupee has set a new negative record, before the trend changed in upward direction.

Now, New Delhi is looking for a series of stabilisation measures that will deliver results, albeit still small. In November, the rupee indexed a 5 percent increase – its best monthly progress since 2015.

India also offers trade with national currencies with some other countries, including Russia, Iran and Venezuela. New Delhi has a trade deficit with these three countries as well. Exchange experts expect that bilateral trade with national currencies will only help India in the countries with which there is a trade balance.

Indian industry and exporters have raised the question several times about improving the trade deficit with China. They demanded from the government to search for better market possibilities in China for Indian goods. Recently China has allowed the export of rice and sugar cultures, but India wants to increase its export of several other products, including pharmaceuticals, engineering equipment and services.

All this is happening against the backdrop of tensions between the two countries in a controversial border region and the rival of influence in the smaller neighbouring countries, which can decide the dominance in Asia.