Rupee-dirham trade with the UAE has started as India talks with other nations on dealing in local currencies.
“There were a few deals right after the agreement was signed recently,” an official said, adding that under the current mechanism India and the UAE are pegging the exchange rate to the US dollar but will have a direct exchange in the coming months, official sources said. During PM Narendra Modi’s visit to UAE, RBI governor Shaktikanta Das and his counterpart signed an agreement for trade in local currency, which will allow Indian exporters to get the payment in dirhams, while an Emirati exporter can receive the proceeds in Indian rupee.
The government is expecting that businesses and funds from the Gulf country with a sizable Indian diaspora will use this window to invest in India. While the surplus that the UAE will have as a result of a good trade balance can be turned into US dollars, enterprises will also have the choice to do so.
Officials said that a number of similar deals are in the works but neither the government nor RBI are willing to disclose any names. Media reported about Indonesia being one of the countries with which talks are currently underway, Singapore and either Brazil or Argentina could be the other candidates. The deal with the UAE has, however, generated a lot of interest among other countries, including some in Europe, which have traditionally been in favour of using their currency. While the government had been pushing for rupee-based trade, the progress had been slower than expected although nearly 20 countries were signed.