Manas Dasgupta
NEW DELHI, July 15: In a boost to bilateral trade and investments, India and the United Arab Emirates on Saturday agreed to start trade settlement in local currencies.
The Prime Minister Narendra Modi, who was in Abu Dhabi on a day’s visit holding talks with UAE President Sheikh Mohamed bin Zayed Al Nahyan, said the bilateral trade between the two countries was now expected to go past the $100 billion-mark soon, as it currently stands at $85 billion.
Reserve Bank of India (RBI) and Central Bank of UAE (CBUAE) signed two agreements in Abu Dhabi to establish a framework for cross-border transactions in local currencies and interlinking of payment and messaging systems. The agreements were exchanged between the two governors, in the presence of Modi and Al Nahyan, the Reserve Bank said in a statement.
The memorandum of agreements (MoUs) are for ‘establishing a framework to promote the use of local currencies viz. the Indian rupee (INR) and the UAE dirham (AED) for cross-border transactions’ and ‘cooperation for interlinking their payment and messaging systems.’ India and the UAE on Saturday agreed to start trade settlement in their currencies and link the Indian Unified Payments Interface with the Gulf country’s Instant Payment Platform (IPP).
The MoU on establishing a framework for the use of local currencies for transactions between India and UAE, aims to put in place a Local Currency Settlement System (LCSS) to promote the use of INR and AED bilaterally. The MoU covers all current account transactions and permitted capital account transactions, the statement issued by the RBI said.
Creation of the LCSS would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-AED foreign exchange market, it said and added that his arrangement would also promote investments and remittances between the two countries. The use of local currencies would optimise transaction costs and settlement time for transactions, including for remittances from Indians residing in UAE, the statement said.
“The India-UAE comprehensive strategic partnership has been steadily strengthening and the Prime Minister’s visit will be an opportunity to identify ways to take this forward in various domains such as energy, education, healthcare, food security, fintech, defence and culture,” the Ministry of External Affairs (MEA) said.
It will also be an opportunity to discuss cooperation on global issues, particularly in the context of the UAE’s Presidency of COP-28 and India’s G-20 Presidency in which the UAE is a “special invitee,” it added.
A Joint Statement issued during the visit said the leaders resolved to further enhance bilateral partnership in the energy field, both in oil, gas, and renewable energy. “Both sides will take forward their cooperation in Green Hydrogen, solar energy and grid connectivity. Both sides also agreed to increase investment across the energy spectrum, including in India’s Strategic Petroleum Reserve Programme,” it said.
It said the leaders acknowledged the joint work on issues of climate change, particularly during India’s presidency of the G20 and the UAE’s presidency of COP28. Recognising the importance of food security, the leaders reiterated their resolve to promote the reliability and resilience of food supply chains and expand food and agriculture trade, including through food corridor projects in India, it said.
Modi on his arrival at the Abu Dhabi airport was accorded a ceremonial welcome at the Qasr-Al-Watan — the presidential palace — where he was greeted by the UAE President with a warm embrace. Modi arrived in the capital of the UAE on his way back from his two-day trip to France where he joined French President Emmanuel Macron for the Bastille Day parade as the Guest of Honour and signed several agreements to strengthen bilateral ties.
In his remarks after meeting the UAE President, Modi said India-UAE trade witnessed a 20% increase since the signing of the Comprehensive Economic Partnership Agreement last year. He said the agreement signed for trade settlement in the currencies of the two countries shows the strong economic cooperation and mutual trust between the two nations.
The UAE President served a full vegetarian meal at the banquet he hosted in honour of Modi. The banquet at the presidential palace here began with harees (wheat) and dates salad served with local organic vegetables and followed by grilled vegetables in masala sauce as starters. The dignitaries were served black lentils and local harees along with cauliflower and carrot tandoori for the main course.
A selection of local seasonal fruits was served for desserts. “All meals are vegetarian and prepared with vegetable oils, and contain no dairy or egg products,” read a note on the menu card for the banquet.