NEW DELHI: The Reserve Bank of India (RBI) has prepared a concept paper for trade settlement in the Indian rupee with the country's third-largest trading partner the UAE, according to Sunjay Sudhir, India's Ambassador to the Middle-East country.
He said the UAE's central bank is looking at the matter and discussing it with the RBI officials to operationalise the mechanism. “We had done a meeting in September. We have shared RBI’s concept paper with the UAE, which has already designated a nodal person for this. Both countries’ central banks are in talks with each other to operationalise trading in local currencies. The main objective of this is to reduce the cost of the transaction,” Sudhir said.
India and the UAE signed free trade agreement (FTA) earlier this year. The FTA got operational in May and as per Srikar Reddy, Joint Secretary at the Department of Commerce, trade between both countries has taken off very well despite global slowdown and inflationary pressure. As per commerce ministry data, in the June-October period, India’s non-oil exports to the UAE rose 8% to $9.69 billion, while the global non-oil exports fell by 2% during the period.
As per Reddy, May data wasn't included as many people were not aware of the implementation of the FTA and due to festivities in the UAE. Electrical machinery, gems and jewellery, cereals, inorganic chemicals, and automobiles were the biggest beneficiaries of the FTA from June-October, the ministry analysis showed. The ministry is trying to create awareness about this FTA via the involvement of Export Promotion Councils and organising road shows in the UAE, a government official said.
The UAE is also part of GCC (gulf cooperation council) countries and India will begin negotiations with them in the first quarter of FY23. "We see a growing interest in both countries...From an investment perspective, we see the UAE as a wonderful platform for investment. The investment would be a positive spinoff under this FTA," Sudhir added.