It's fair to both India and Iran ... and circumvents western sanctions.
The international price of oil is set in USD .. and USDINR is highly liquid market. The USDINR rate is set by the market, not pegged by government of India or the RBI.
Given that, Iran continues to be paid a USD-equivalent price .. which it cannot get directly due to US sanctions.
Other currencies e.g. USDCNY is a pegged currency .. and (i) its true value is anyone's guess, (ii) PRC govt can change the peg anytime ... causing heavy losses to anyone who bets that CNY will only appreciate.
Iran is permitted to deploy its rupee holdings in Govt of India debt .. which is again a highly liquid market (just like US treasuries, although GoI does not permit foreigners to own sovereign rupee debt except some FIIs).
The returns on sovereign rupee debt earn an interest rate comparable to rate of inflation .. hence, the actual rupee holdings do not lose value with time (in fact earning a small real rate of interest).
GoI debt earns around 7-8% p.a. so even if Iran imports on a deferred basis, it keeps the value of its rupee holdings intact.
Next, if and when US sanctions are over, it can convert the rupees back to USD at the prevailing rate of exchange. Because India will treat Iran's rupee holding just like NRI deposits which are rupee denominated.
Given the relative cheapness of things in India due to rupee trading at 60 to the USD, NRI find it highly lucrative to rush into owning rupee assets (they earn around 9% in bank FDs, which are off course have less credit than sovereign debt).
Similarly, Iran will be paid for its oil at USD-equivalent price but earning 60 rupees for the dollar .... so you get your basmati rice or pharmaceuticals or cement for less oil than say one year back. And the 55 rupees to the dollar which you earned last year, already increased to 60 due to the interest rate on GoI debt.
Iran is treated fairly, and India is the most liquid market that it can trade with.
Yes, for India its good ... or actually just fair. Iran can now own GoI securities, just like Japan or PRC holds US Treasuries.
Iran's exposure to India .. .is same as Japan's or PRC's exposure to US treasuries.
India doesn't like foreigners to own GoI rupee debt ... just an exception is made for Iran, since the size of its holdings are expected to be quite small compared to the overall size of GoI securities market.
