As Russian oil purchases soared, India paid $15 billion of imports in rupees over three months

📌 Summary:

• India settled roughly $14.6 billion (Rs 1.38 lakh crore) of imports in rupees during March–May 2026 — 7.1% of merchandise imports, sharply up from Rs 42,506 crore (2.4%) in December 2025–February 2026
• Main driver: a surge in Russian crude purchases after the US/Israel attack on Iran (late February) shut the Strait of Hormuz, through which ~40% of India's oil needs transit
• US sanctions waivers on Russian crude (first on March 12, then April 17 and May 17, the last expiring June 17) enabled record buying; Russian crude imports hit $17.13 billion in March–May (up 30% year-on-year) versus just $2.49 billion in February
• The rupee-settlement mechanism is not new — the RBI announced a framework for settling international trade in rupees in mid-2022
• Rationale: paying in rupees reduces foreign-currency outflow and helps stabilise the rupee, which fell to record lows amid foreign capital outflows and geopolitical stress; India ran a $119 billion trade deficit in 2025-26
• Rupee-settled Indian exports also rose (Rs 15,195 crore in February to Rs 41,373 crore in March) before easing

🎯 UPSC Relevance: GS3 Economy — external sector and balance of payments, currency internationalisation, energy security and the impact of geopolitics on trade.

📝 Prelims Facts:

• RBI announced its rupee international-trade settlement framework in mid-2022 (Vostro account mechanism)
• ~40% of India's oil needs transit the Strait of Hormuz
• India's 2025-26 trade deficit stood at $119 billion

🔑 Key Term: Rupee trade settlement — mechanism (via Special Rupee Vostro Accounts) allowing India to pay/receive in Indian rupees for foreign trade, reducing dependence on the US dollar.