In a compelling turn of events this Saturday, India and the United Arab Emirates (UAE) inked a landmark agreement facilitating trade transactions to be settled in their native currencies, rupees and dirhams, instead of relying on the U.S. dollar. India’s prime minister Narendra Modi visited the UAE, where the countries announced the linking of the UAE’s Instant Payments Platform (IPP) and India’s Unified Payments Interface (UPI).
India, UAE Ink Deal for Trade in Native Currencies
India and the UAE signed a memorandum of understanding Saturday to promote trade settlements in rupees and dirhams. Indian Foreign Secretary Vinay Mohan Kwatra said that although short, prime minister Narendra Modi’s visit to Abu Dhabi was a “landmark in the partnership between India and the UAE.” In addition to facilitating trade in both currencies, the countries will link India’s UPI and the UAE’s IPP systems.
“This is a very important aspect of India-UAE cooperation. It paves the way for enhanced economic collaboration and will make international financial interactions simpler,” prime minister Narendra Modi said.
Furthermore, both countries announced a plan for the Indian Institute of Technology to establish a campus in Abu Dhabi, partnering with IIT-Delhi. This endeavor aims to strengthen technological innovation ties between India and the UAE. “The manner in which ties between our countries have expanded, you have made a big contribution to that. Every person in India views you as a true friend,” Modi conveyed to the UAE’s president and Abu Dhabi’s ruler, Sheikh Mohamed bin Zayed Al Nahyan.
Before the recent agreement between India and the UAE to settle trade payments in rupees and dirhams, Indian refiners were required to buy U.S. dollars to purchase oil. For approximately 48 years, many international buyers were obligated to pay for Saudi Arabian crude in U.S. dollars. That has been shifting recently. In January, just six months prior, Saudi Arabia’s finance minister Mohammed Al-Jadaan announced the kingdom’s openness to trading in currencies other than the U.S. dollar.
Although the recent agreement between Modi and Al Nahyan simplifies transactions, several Indian refiners had already begun to veer away from the U.S. dollar, opting for the UAE’s dirham when buying Russian crude oil. Among those adopting the dirham were companies such as Reliance Industries, Bharat Petroleum, and Nayara Energy. Initially, there were some stumbling blocks, as reports suggest the State Bank of India (SBI) encountered difficulties with these settlements. However, since February, SBI has successfully been clearing dirham payments.
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