NEW DELHI: The central banks of India and UAE are discussing a concept paper on promoting bilateral trade in rupee and dirham with a view to reducing transaction costs, a top official said on Friday.
India's Ambassador to the UAE Sunjay Sudhir said that the concept paper for trade in local currencies was shared by India.
The central banks of both countries will discuss the standard operating procedures and modalities, he told reporters here.
The objective of the exercise is to reduce the cost of transactions, he added.
India and the UAE had already signed a free trade agreement (FTA) in February to give a fillip to bilateral trade and economic ties. The free trade agreement was aimed at providing significant benefits to Indian as well as UAE businesses, including enhanced market access and reduced tariffs.
Following the free trade pact, bilateral trade is expected to increase from the current USD 60 billion to USD 100 billion in the next five years.
Bilateral trade between India and the UAE stood at USD 43.3 billion in 2020-21. Exports were worth USD 16.7 billion and imports aggregated at USD 26.7 billion in 2020-21. Two-way commerce stood at USD 59.11 billion in 2019-20.
SBI Research, in a report in early July, said, an interesting development is taking place in the global currency market as there has been a significant jump in trade in oil and other commodities in currencies such as the Renminbi, Hong Kong Dollar, and Arab Emirates Dirham.
In the report, SBI Research said the Reserve Bank of India (RBI) should make a conscious effort to internationalise the Indian currency rupee amid disruptions in payments caused by the ongoing Russia-Ukraine war.