India uses rupee and not dollar in the crude oil deal, signifying a desire to dedollarize economic relations between India and the UAE.
Indian and UAE trade relations have reportedly changed for the better as of August 14, according to recent sources. Just prior to the eagerly anticipated BRICS conference, India, a significant member of the group, completed its first crude oil deal with the UAE using rupees rather than US dollars.
Additionally, this transaction is not an isolated one but rather the result of a larger plan. The two countries wrote a contract in July allowing trade settlements in their domestic currencies. As a result, this modification gets rid of the extra step of dollar conversion, cutting transaction costs.
An Initiative That Transcends Normal Trade
In addition to its obvious economic implications, this choice also sends a political message about India’s desire to lessen its reliance on the dollar. De-dollarization is clearly a priority, not just with the UAE but also on a global scale, with the purpose of strengthening international ties.
The July deal includes building a real-time payment link, supporting simpler cross-border fund transfers. The planned interlinking of India’s RuPay and the UAE’s UAESWITCH will also soon allow cardholders in both countries to enjoy the convenience of using their domestic cards interchangeably.
India has attempted to internationalize the rupee, although it has not had much success. In comparison to India’s enormous $1.2 trillion in goods trade during the previous fiscal year, local currency trade volumes have so far paled. Consequently, despite the new India-UAE deal being praiseworthy, the path to India’s goal of bringing the rupee worldwide still appears to be lengthy and winding.
Furthermore, it is indisputable that these agreements will probably lead to more seamless financial transactions between the two nations. Given that the UAE is India’s second-largest remittance source, this partnership has great potential for both countries.
Finally, India’s strategic partnership with the UAE sends a powerful statement as the world anxiously awaits the impending BRICS conference. The country is preparing to diversify its trading strategies by going outside of the dollar, and it’s more than just for business—it’s a geopolitical intention.
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