The latest development in India-UAE local currency trade marks a historic shift as India’s top refiner completed its first payment in rupees for crude oil. According to a statement from the Indian embassy in the UAE on Monday, Indian Oil Corp made the payment to the Abu Dhabi National Oil Company (ADNOC) for one million barrels of oil. This transaction serves as a concrete step toward reducing the reliance on the US dollar for bilateral commerce.
Expanding Beyond Energy into Precious Metals
In addition to the oil sector, the India-UAE local currency trade framework successfully facilitated a major gold transaction. A UAE-based exporter sold 25 kg of gold to a buyer in India for approximately 128.4 million rupees ($1.54 million). These successful trades follow an agreement signed in July, which allows both nations to settle trade in rupees instead of dollars. Consequently, this shift eliminates expensive dollar conversions and significantly cuts transaction costs for businesses on both sides.
Strengthening Financial Connectivity and Payment Links
During Prime Minister Narendra Modi’s visit to the UAE, both countries also agreed to establish a real-time payment link. This infrastructure will facilitate easier and faster cross-border money transfers between the two nations. Furthermore, this digital connectivity supports the broader goal of deepening economic ties. Because bilateral trade reached $84.5 billion in 2022/23, these financial tools are essential for managing the growing volume of commerce.
Boosting Exports Amidst Global Trade Slowdown
India remains keen to push similar local currency arrangements with other trading partners worldwide. By implementing India-UAE local currency trade models, the government looks to boost exports even as global trade experiences a slowdown. Therefore, these arrangements provide a competitive advantage by streamlining payment processes. Overall, the successful execution of oil and gold trades in local currencies signals a new era of financial independence and strategic partnership for India and the Middle East.
Courtesy: economictimes.indiatimes.com
