The United Arab Emirates (UAE) and India are reportedly discussing the possibility of settling non-oil trade between the two countries in Indian rupees. This move is aimed at reducing the dependence on the US dollar and other foreign currencies in trade between the two countries. Currently, most international trade is conducted in US dollars, which can be subject to fluctuations in currency exchange rates. By settling trade in rupees, UAE and India would be able to avoid such fluctuations and make their trade more stable.
The use of the rupee for trade between the two countries will also help to boost the role of the Indian currency in international trade and finance. It would also create more demand for the rupee, which could help to strengthen the currency and make it more attractive for other countries to trade in. This move is also expected to help increase the volume of trade between UAE and India, as it would make it easier and more cost-effective for businesses in both countries to conduct trade with each other.
The action would build upon a 2022 deal that sought to double non-oil commerce between the two nations to $100 billion by 2027. It would also represent a significant shift away from the US dollar, which currently dominates commodity markets and commerce with Persian Gulf countries.This week, the finance minister of Saudi Arabia also declared willingness to conduct business in non-dollar currencies.
Western sanctions, which blocked the Kremlin’s foreign exchange holdings in reaction to Russia’s invasion of Ukraine, emphasised the hazards of reliance on the dollar. Russia and Iran are apparently collaborating to establish a cryptocurrency backed by gold, with the goal of replacing the US dollar in international trade payments.