China has not accepted India’s proposal to carry out bilateral trade in local currencies. India had suggested to China trade in local currency in order to boost its exports and tackle the widening trade deficit.

India’s exports to China stood at only $13.4 billion while imports were $76.4 billion in 2018, leaving a trade deficit of $63 billion. It was $51.11 billion in 2017. India has proposed trade in national currencies with some other countries, too, including Russia, Iran and Venezuela. New Delhi has a trade deficit with these three countries too.

Bilateral trade in domestic currencies will help India only in the case of those countries with which it has a trade balance. There should be no trade imbalance with the country with which India wants to do trade in the rupee. It will not help in bridging the deficit.

Indian industry and exporters have time and again raised the issue of increasing trade deficit with China and have sought greater market access for domestic goods in the Chinese market. Recently, China permitted exports of rice and sugar. But India wants to increase exports of several other items, including pharmaceuticals, engineering and services.