A Memorandum of Understanding (MoU) on trade in national currencies was signed between Prime Minister Narendra Modi and the President of the UAE, Sheikh Mohamed bin Zayed Al Nahyan. This agreement is aimed at facilitating trade transactions using the local currencies of both countries.
As a result of the MoU, the Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL) successfully conducted their first-ever crude oil transaction in national currencies.
The transaction involved the sale of one million barrels of crude oil, utilizing both the Indian rupee and UAE dirhams as the payment currencies.
Trade in local currencies is a significant aspect of India-UAE cooperation as it simplifies international financial interactions and enhances economic collaboration between the two nations.
The UAE is a crucial partner for India in the oil and gas sector, playing a vital role in India's energy security. Petroleum products constitute a significant portion of trade between the two nations.
The UAE is the fourth-largest source of crude oil and the second-largest source of LNG (liquefied natural gas) and LPG (liquefied petroleum gas) for India. In 2022, petroleum products worth $35.10 billion were traded between the two nations, constituting a substantial portion of bilateral trade.
The Local Currency Settlement (LCS) is expected to reduce transaction costs and time while also promoting reliance on local currencies. This aligns with the preferential terms of the Comprehensive Economic Partnership Agreement (CEPA), allowing traders to choose the payment currency based on mutual agreement.
The first transaction under LCS took place on July 15, involving the sale of 25 kg of gold from a UAE gold exporter (Peekay Intermark) to an Indian buyer (YES Bank). The value of this transaction was ₹12.84 crore.
The trade between India and the UAE rose to $85 billion in 2022, solidifying the UAE's position as India's third-largest trading partner for the fiscal year 2022-23. The UAE is also India’s second-largest export destination, while India is the UAE’s second-largest trading partner.
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