India and UAE Take Steps to Strengthen Economic Ties with Rupee-Dirham Trade Pact

India and UAE Sign Rupee-Dirham Trade Pact

India and the United Arab Emirates (UAE) have signed agreements to settle trade in rupees and dirhams. The agreements were signed on February 18, 2022, during a virtual summit between Indian Prime Minister Narendra Modi and UAE President Sheikh Mohamed bin Zayed Al Nahyan. The agreements are part of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), which entered into force on May 1, 2022.

The agreements will allow exporters and importers from either side to invoice and pay in their respective domestic currencies, which will reduce transaction costs and settlement time. The agreements will also promote investments and remittances between the two countries.

Benefits of the Rupee-Dirham Trade Pact

There are several benefits to the rupee-dirham trade pact. First, it will reduce transaction costs for businesses. When businesses have to convert money between currencies, they incur fees and other costs. Using local currencies will eliminate these costs, which can save businesses money.

Second, the pact will speed up settlement times. When businesses invoice and pay in their respective domestic currencies, the settlement process is faster. This is because the money does not have to be converted between currencies, which can take several days.

Third, the pact is expected to boost trade between India and the UAE. The two countries have a long history of trade and investment, and the CEPA is expected to further boost these ties. The use of local currencies will make it easier for businesses to trade with each other, which will lead to increased trade.

Fourth, the pact will promote investments and remittances between the two countries. When businesses invest in each other's countries, they often need to remit money between countries. Using local currencies will make this process easier and cheaper, which will promote investments and remittances.

Conclusion

The signing of the rupee-dirham trade pact is a significant step in strengthening the economic ties between India and the UAE. The two countries have a long history of trade and investment, and the CEPA is expected to further boost these ties. The use of local currencies will reduce transaction costs, speed up settlement times, boost trade, and promote investments and remittances between the two countries.