Context– Recently, India-UAE signed a Rupee-Dirham deal during Prime Minister Narendra Modi’s visit. Significance for India
News Source- The Hindu
- Deal between Central Banks: The Central Bank of the UAE and the Reserve Bank of India (RBI) decided to move on with the expansion of their economic cooperation.
- Local Currency Settlement System: The LCSS agreement will also promote international investments and money transfers.
- Indian Remittance: With regard to Indian remittances to the UAE in particular, using local currencies will expedite settlement and reduce transaction costs.
- Fourth-Largest Source of Energy: Paying in Rupees would help India to pay for the purchase of items from the UAE, which is its fourth-largest source of energy, including oil and other commodities.
- For UAE’s oil at the moment, India pays the UAE in dollars.
- India-UAE Payment Messaging System: The MoUs would also enable a connection between the UAE’s payments messaging system and India’s Structured Financial Messaging System (SFMS).
- Central bank Cooperation: Two MoU pertaining to diverse subjects have been signed between the Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (CBE).
- Cross-border Transaction: A framework for promoting cross-border transactions in local currencies (rupee and dirham) will be provided by the first agreement.
- Areas of Cooperation: According to the second MoU, the two central banks will cooperate to link the Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of the UAE, as well as with RuPay switch and UAESWITCH.
- Alternate to SWIFT: Both countries will work to create a messaging system that might compete with SWIFT (the Society for Worldwide Interbank Financial Telecommunication).
- The UAE and India’s airlines are permitted to fly a total of 66,000 seats per week between Dubai and 15 Indian destinations under the bilateral air service agreement (ASA) that was signed in January 2014 between the two countries.
- Since the Comprehensive Economic Partnership Agreement between the UAE and India went into effect in May 2022, trade between the two countries has risen by almost 15%.
- About $85 billion in bilateral trade, including oil purchases, is exported from the UAE to India, accounting for about $50 billion of that total.
|What is CEPA? A Comprehensive Economic Partnership Agreement (CEPA) is a trade pact between two or more nations that lowers trade and investment barriers in an effort to advance economic cooperation and integration. a thorough trade pact that addresses products, services, and investments.