17 July 2023
During an official visit by India’s Prime Minister Narendra Modi to the United Arab Emirates (UAE), the two countries have taken steps to reduce their reliance on the U.S. dollar. They have signed an agreement allowing trade settlement in Indian rupees instead of dollars, aiming to eliminate the costs associated with currency conversions. Additionally, they have agreed to establish a real-time payment link to facilitate cross-border money transfers, further promoting seamless transactions and greater economic cooperation.
India, as one of the world’s largest importers and consumers of oil, has traditionally paid for UAE oil in dollars. However, with this new agreement, India could potentially make its first rupee payment for UAE oil to Abu Dhabi National Oil Co (ADNOC). This move aligns with India’s previous announcement to settle global trade in rupees, showcasing its efforts to reduce dependence on the dollar.
The Reserve Bank of India has stated that the central banks of India and the UAE will link India’s Unified Payments Interface (UPI) with UAE’s Instant Payment Platform (IPP). This integration, similar to arrangements seen in other Asian countries, is expected to lower the cost of payments and facilitate smoother financial transactions.
Prime Minister Modi’s visit to Abu Dhabi signifies the growing economic cooperation between India and the UAE. By diversifying their payment options and reducing their reliance on the U.S. dollar, both countries aim to strengthen their economic ties and promote greater financial independence.