India is exploring local currency trade with GCC countries to reduce exposure to dollar volatility and rising import costs.
The move comes amid escalating West Asia tensions, multi-year highs in crude prices, and the rupee hitting a record low.
Officials say bypassing the dollar could lower conversion costs, stabilise trade flows, and protect India’s import bill.
India is exploring alternate ways to settle trade with West Asian countries in local currencies to protect its import bill for oil and other goods from external shocks, Moneycontrol reported, citing government officials. The shift is aimed at reducing exposure to global uncertainties that could disrupt trade flows and inflate import costs, especially for crude and petroleum products. The move comes amid escalating tensions in West Asia and fears of a prolonged period of higher crude prices.
“We should ensure that India is protected from external uncertainties whenever they arise, such as the ongoing conflict,” the report quoted a government official as saying.
2 March 2026
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The Gulf Cooperation Council (GCC) countries include Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain. India mostly imports petroleum and crude from West Asia and was just pivoting to these suppliers after mounting pressure from the US to halt its crude dependence on Moscow.
However, after months of reducing Russian crude imports, geopolitical tensions in West Asia sent benchmark Brent and West Texas Intermediate (WTI) crude to multi-year highs, breaching $119.50 per barrel. The surge in crude prices and the shutting down of the Strait of Hormuz in retaliation by Iran have posed severe risks to global trade and supply.
India imports nearly 90% of its crude and around 60% of its liquefied natural gas and liquefied petroleum gas to meet its daily needs. A volatile oil market and swings in fuel prices can heavily impact India’s import bill, widen the trade deficit, and push inflation higher.
According to the report, it is in this context that trading in local currencies could help, especially since 28% of India’s total crude imports in FY25 were from GCC countries. Officials stated that enabling trade in domestic currencies would help avoid routing transactions through the US dollar, thereby lowering conversion costs and limiting the impact of exchange rate volatility.
“We can’t estimate the trajectory of the rupee, and imports are getting costly. That’s why it’s important to have arrangements where trade happens in local currencies, not in dollars,” the first official said. The rupee hit a lifetime low of 92.56 against the greenback on Wednesday, ahead of the US Federal Reserve’s policy outcome.
The report added that discussions on such a currency framework are expected to take place alongside India’s free trade agreement (FTA) negotiations with the GCC, which are likely to begin only in the second half of the year.
