In a significant development for the BRICS nations, India has made its first local currency transaction with the United Arab Emirates (UAE) in an oil trade. Both countries settled the deal in rupees, moving away from using the US dollar in their bilateral dealings earlier this year.
This agreement is part of the ongoing efforts within the economic alliance to reduce reliance on the US dollar, a strategy implemented throughout the year. The UAE joined the bloc during its 2023 annual summit, alongside Saudi Arabia, Egypt, Iran, and Ethiopia.
Throughout 2023, the BRICS economic alliance has actively pursued global advancement, with a focus on diminishing Western influence in international trade. In line with this objective, two member nations collaborated on an agreement aimed at decreasing their reliance on the US dollar in bilateral transactions.
The realisation of this agreement occurred with India, a BRICS member, making its first local currency payment to the UAE in a recently established oil deal. This transaction, settled in rupees, contributes to the $157.5 billion India has allocated for imported oil.
This move not only reflects the global initiative by the BRICS and its constituent nations to reduce the prevalence of the US dollar but also highlights the relevance of the rupee as a currency for trade settlement. In 2022, the Reserve Bank of India introduced an initiative enabling importers to make purchases in rupees, while exporters would receive payments in the same currency.
The bilateral trade marks one of the early stages of a potentially advantageous partnership between India and the UAE. The UAE is scheduled to officially join the bloc in 2024, following its invitation in August of the preceding year.
The two nations are poised to engage in strategic discussions to explore expanded trade opportunities and economic diversification amid the evolving global power dynamics.
