UAE, India keen on rupee-dirham trade

India is in talks with the UAE for a rupee-dirham-denominated bilateral trade, Sunjay Sudhir, Indian Ambassador to the UAE, said on Friday.

The central banks of India and UAE are discussing a concept paper on promoting bilateral trade in local currencies of both countries with a view to reduce transaction cost, news agency PTI reported.

Sudhir said that the concept paper for trade in local currencies was shared by India.

“Both countries find this beneficial. India has shared a concept paper with UAE. Central Banks of both countries are discussing. The objective is to reduce the transaction cost,” Sudhir said in New Delhi.

The central banks of both the countries will discuss the standard operating procedures and modalities, he added.

The UAE and India signed a free trade agreement (FTA) in February to give a fillip to bilateral trade and economic ties. Following the free trade pact, bilateral trade is expected to increase from the current $60 billion to $100 billion in the next five years. Bilateral trade between India and the UAE stood at $43.3 billion in 2020-21. Exports were worth $16.7 billion and imports aggregated at $26.7 billion in 2020-21. The two-way commerce stood at $59.11 billion in 2019-20, according to media reports.

It is widely believed if the mechanism fructifies then it may go a long way in internationalizing the Indian currency rupee in the long run. A currency can be termed “international” if it is widely accepted worldwide as a medium of exchange.

In early July, SBI Research, said there has been a significant jump in trade in oil and other commodities in currencies such as the Renminbi, Hong Kong Dollar, and the UAE dirham.