India pays for the UAE oil in rupees for the first time

India and the United Arab Emirates have commenced a new chapter in their trade relations by opting to settle bilateral trade transactions in their respective local currencies. Notably, India's foremost refiner recently utilized the Indian rupee to make payments for the acquisition of one million barrels of oil from the Middle Eastern nation, as confirmed by the Indian government on Monday. The payment, in this case, was made by Indian Oil Corp (IOC.NS) to the Abu Dhabi National Oil Company (ADNOC), as indicated in a statement released by the Indian embassy in the UAE.

This development follows a previous transaction in which 25 kilograms of gold from a UAE-based exporter were sold to an Indian buyer, with the payment amounting to approximately 128.4 million rupees ($1.54 million). The foundation for this currency arrangement was laid in July when India and the UAE signed an agreement allowing trade settlements in Indian rupees rather than U.S. dollars. This move is expected to reduce transaction costs by eliminating the need for dollar conversions.

During a visit by Indian Prime Minister Narendra Modi to the UAE, the two nations also agreed to establish a real-time payment link to facilitate more seamless cross-border money transfers.

Bilateral trade between India and the UAE reached $84.5 billion during the 2022/23 fiscal year. India is actively exploring similar local currency trade arrangements with other countries as part of its strategy to bolster exports, particularly in the context of a global trade landscape marked by a slowdown.