Rupee Slump to Push India to Seek Yuan Trade Settlement

India is considering allowing some imports from China to be settled in yuan, people familiar with the proposal said, as the South Asian nation moves to limit its currency’s loss against the dollar.

The plan would enable direct convertibility between the rupee and yuan and will help cut transaction and hedging costs, the people said, asking not to be identified citing rules. The proposal would allow Indian exports of pharmaceuticals, oilseeds and sugar to China to be settled in rupee, while keeping out trade in high volume products such as electronics, they said.

India-China trade is mainly settled in U.S. dollars since currencies between the two nations aren’t directly convertible. By allowing Indian importers to pay for Chinese goods in yuan, the South Asian nation would be able to save on dollars to pay for escalating oil import costs in the face of higher crude prices and the rupee’s slump to a record low.