India took a significant stride towards promoting the use of the rupee in the Gulf region through the signing of two memoranda of understanding (MoUs) between the Reserve Bank of India and the Central Bank of the United Arab Emirates. This event was witnessed by UAE President Sheikh Mohamed bin Zayed Al Nahyan and Prime Minister Narendra Modi, who was visiting the Gulf country on his way back from France.
India and UAE Strengthen Cooperation in Cross-Border Transactions and Payment Systems
The first MoU aims to establish a framework that encourages the use of local currencies, specifically the rupee and dirham, for cross-border transactions. The second agreement focuses on connecting the payment and messaging systems of the two central banks.
A joint statement issued after the visit highlighted the leaders’ interest in enhancing cooperation in the payment systems domain, with a particular emphasis on facilitating more efficient integration of cross-border transactions between the UAE and India. This collaboration will involve the mutual acceptance of domestic card schemes by linking national card switches, ultimately improving access to payment services for citizens and residents of both countries.
These agreements between the central banks align with the growing trend of conducting business in local currencies, which gained momentum following the Ukraine crisis in February 2022. They also follow Indian entities initiating payments in yuan to Russian energy companies.
Strengthened Ties in Education, Trade, and Collaborative Platforms
Furthermore, aside from the MoUs related to trade in local currencies, the leaders also witnessed the signing of an agreement to establish a branch of the Indian Institute of Technology-Delhi in Abu Dhabi. Prime Minister Modi also met with Dr. Sultan Al Jaber, President-designate of CoP28 and Group CEO of Abu Dhabi National Oil Company, who briefed him on the UAE’s approach to the upcoming meeting. The Indian government expressed its full support for the UAE’s COP-28 Presidency.
This visit marked Prime Minister Modi’s fifth visit to the UAE, and bilateral trade between India and the UAE reached $85 billion in 2022. The UAE stands as India’s third-largest trading partner for 2022-23 and the second-largest export destination. Since the implementation of the Comprehensive Economic Partnership Agreement (CEPA) on May 1, 2022, bilateral trade has increased by approximately 15%, as stated by the Ministry of External Affairs.
The discussions also covered the agendas of various groupings, including I2U2 (India, Israel, UAE, and USA), as well as trilateral cooperation between the UAE, France, and India, where both sides collaborate with other influential powers.
