India seeks more trade deals in local currency – Times of India

New Delhi: As India negotiates trade with other countries in local currency, trade with rupee-dirham United Arab Emirates has begun.
“Some deals were done just after the agreement was signed last week,” said an official. He said that under the current mechanism, India and the UAE are fixing an exchange rate equal to the US dollar, but in the coming months there will be a direct exchange. official sources told TOI. During PM Narendra Modi’s visit to UAE last week reserve Bank of India Governor Shaktikanta Das And his counterpart signed an agreement to trade in the local currency, which will allow Indian exporters to receive payments in dirhams, while an Emirati exporter can receive income in Indian rupees.
While the surplus that the UAE will have due to a positive trade balance can be converted into US dollars, businesses will also have the option of investing money in India – a window that the government is hoping will be used by Gulf businesses and funds. A nation with a large Indian diaspora.
Officials said several similar deals are in the works but neither the government nor the RBI is ready to reveal any names. While TOI reported that Indonesia is one of the countries with which talks are currently on, Singapore and Brazil or Argentina could be other candidates. However, the agreement with the United Arab Emirates has generated a lot of interest among other countries, including some countries in Europe, which have traditionally been in favor of using their own currency. While the government was pushing for rupee-based trade, progress was slower than expected, although around 20 countries had signed up. Even exporters seem more comfortable with the local currency trading regime.
One of the biggest advantages is the cost savings because of the cost of converting the currency first into dollars and then into, say, dirhams.
Moreover, officials said, even the paperwork would be simplified, as the entire transaction switching system was done through SWIFT.