Switzerland: The United Arab Emirates (UAE) is in discussion with India to trade non-oil commodities in Indian rupees, Emirati Foreign Trade Minister Thani Al Zeyoudi said.
Asked whether trade in rupee with India was on the table, Al Zeyoudi told news agency Reuters: “Yes, we are in discussion with the Indians”.
He further said the talks are related to non-oil commodities.
“They (the talks to trade in Indian rupee) are in the early stages,” the UAE minister said in an interview on the sidelines of the World Economic Forum 2023 in Davos, Switzerland.
UAE planning its budgets based on US dollars
Majority of Gulf trade is carried out in US dollars. However, several countries including India and China have been increasingly seeking to pay in local currencies as it lowers transaction costs apart from several other benefits.
The countries have expressed their need to settle non-oil trade payments in local currencies, but discussions were not at any advanced stage, the UAE minister said.
“We have to be realistic, we are planning our budgets based on (US) dollars so it is not an overnight movement,” Al Zeyoudi said.
He further said, “There is a discussion, not only with India, but we are managing it in a way that does not conflict with the overall interests of the nation.”
He added that any progressive discussions should be in favour of all countries involved, and for the UAE, as well as it should add value to the growth of the Gulf Arab state’s economy.
For the unversed, Chinese President Xi Jinping during his visit to Saudi Arabia in December called for oil trade in yuan as his country seeks to establish its currency internationally.
India-UAE free trade agreement
Last year, UAE signed a wide-ranging free trade agreement with India, the Emirates’ one of the biggest trade partners for Gulf Arab oil and gas producers.
The India-UAE FTA was signed to give a fillip to bilateral trade and economic ties.
FTA was aimed at providing significant benefits to businesses in India and UAE, including enhanced market access and reduced tariffs.
The free trade pact aims to increase bilateral non-oil trade from the current USD 60 billion to USD 100 billion in the next five years.
Also in November last year, the central banks of India and UAE discussed a concept paper on promoting bilateral trade in rupee and dirham with a view to reduce transaction cost.
Earlier this week, Saudi Arabia said it is open to discussions about trade in currencies other than the US dollars.
According to a report by Bloomberg TV, Saudi Arabia’s finance minister Mohammed Al-Jadaan said, “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal.”
Indian rupee trade settlement
India’s central Bank – Reserve Bank of India (RBI) – in July last year set up Indian rupee trade settle mechanism to attract interest from countries.
The rupee trade mechanism is a method of using INR instead of dollars and other big currencies for international transactions.