Jamal Al-Farouq A momentous agreement was struck on Saturday, as India and the United Arab Emirates (UAE) laid out plans to carry out trade settlements using their respective currencies, the rupee and dirham, bypassing the traditional reliance on the U.S. dollar. The event coincided with Indian Prime Minister Narendra Modi’s visit to the UAE, during which both nations disclosed plans to link the UAE’s Instant Payments Platform (IPP) with India’s Unified Payments Interface (UPI).
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Landmark Accord Allows India, UAE to Conduct Trade in Local Currencies
On Saturday, India and the UAE formalized a memorandum of understanding that seeks to promote trade settlements in their local currencies. Indian Foreign Secretary Vinay Mohan Kwatra marked Modi’s short but significant visit to Abu Dhabi as a “milestone in the partnership between India and the UAE.” The alignment of India’s UPI and the UAE’s IPP systems forms part of this pivotal trade pact.
Prime Minister Narendra Modi underlined the significance of the deal, saying, “This crucial facet of India-UAE cooperation paves the way for an uplift in economic collaboration and greatly simplifies international financial dealings.”
The countries also shared plans to establish a campus of the Indian Institute of Technology in Abu Dhabi, in conjunction with IIT-Delhi, to bolster technological innovation bonds between India and the UAE. “The growth of ties between our nations is, in large part, thanks to you. Every Indian regards you as a trusted ally,” Modi told the UAE’s president and Abu Dhabi’s ruler, Sheikh Mohamed bin Zayed Al Nahyan.
Prior to the recent pact allowing India and the UAE to settle trade transactions in rupees and dirhams, Indian refiners had to purchase U.S. dollars to buy oil. For about 48 years, the majority of global purchasers had to pay for Saudi Arabian crude in U.S. dollars. However, this began to change six months ago, when Saudi Arabia’s finance minister, Mohammed Al-Jadaan, declared the kingdom’s willingness to trade in currencies other than the U.S. dollar.
While the agreement between Modi and Al Nahyan does streamline transactions, a number of Indian refiners, including Reliance Industries, Bharat Petroleum, and Nayara Energy, had already started moving away from the U.S. dollar, favoring the UAE’s dirham for purchasing Russian crude oil. There were initial hitches, with reports indicating that the State Bank of India (SBI) faced some issues with these settlements. But since February, SBI has been successfully handling dirham payments.
What’s your take on the India-UAE trade agreement? We’d love to hear your views and thoughts on this subject. Please leave your comments below.
Frequently Asked Questions (FAQs) about India-UAE Trade Agreement
What currencies will be used for trade settlements between India and the UAE?
India and the UAE have agreed to use their respective local currencies, the Indian rupee and the UAE dirham, for trade settlements.
What is the significance of Indian Prime Minister Narendra Modi’s visit to the UAE?
Modi’s visit to the UAE marked the signing of a landmark agreement allowing trade transactions to be conducted in rupees and dirhams. In addition, the countries announced the integration of the UAE’s Instant Payments Platform (IPP) and India’s Unified Payments Interface (UPI).
What other collaborative ventures have India and the UAE announced?
In addition to the agreement on currency use, India and the UAE also disclosed plans to establish a campus of the Indian Institute of Technology in Abu Dhabi, in association with IIT-Delhi, with the aim of strengthening technological innovation ties between the two countries.
How does this agreement impact Indian refiners?
Previously, Indian refiners had to buy U.S. dollars to purchase oil. Now, with the new agreement, they can purchase oil using dirhams. Some Indian refiners, such as Reliance Industries, Bharat Petroleum, and Nayara Energy, have already started using dirhams for purchasing Russian crude oil.
Have there been any issues with transactions in dirhams?
Initially, the State Bank of India (SBI) faced some issues with settlements in dirhams. However, since February, SBI has been able to successfully clear dirham payments.
More about India-UAE Trade Agreement
- India, UAE Sign Landmark Agreement
- Modi’s Visit to UAE: Overview
- Details on India-UAE Trade Agreement
- Impact of the New Trade Agreement on Indian Refiners
- State Bank of India Successfully Clears Dirham Payments
5 comments
Wow, this is a big move! Is this the beginning of the end for the US dollars dominance? Guess time will tell…
Modi is taking some bold steps… really interesting to see how this pans out. But it’s definetly good news for indian refiners.
Sounds promising for us in the UAE. It’s gud to see more collaboration between us and our friends in India.
Not an expert on economics, but this seems like a major shift in global trade. anyone else feeling the same?
finally! It’s about time our countries stopped relying so heavily on the US dollar.