India, Saudi Arabia to explore trade in local currencies

The external affairs ministry of India said on September 11 that talks had begun with the kingdom of Saudi Arabia about settling commerce in local currencies.

Ausaf Sayeed, external affairs secretary (consular, passport, visa, and overseas Indian affairs), told reporters during the official visit of Saudi Arabia's Crown Prince and Prime Minister Mohammed bin Salman that talks were at the "discussion stage."

Discussions between the two sides have begun. Proposals and concept notes have been traded, however at this point it is still merely at the discussion stage. Sayeed remarked, "The Saudi side is aware that we have worked out similar arrangements with other countries in the region."

Commenting on the meeting between Prime Minister Narendra Modi and Mohammed bin Salman, he said, "The two leaders expressed their satisfaction at the volume of trade both countries have achieved, with India being the second-largest trading partner of Saudi Arabia and Saudi being the fourth-largest trading partner of India."

In 2022-23, bilateral trade between India and Saudi Arabia totaled $52.76 billion, with exports totaling $10.73 billion and imports totaling $42.04 billion. The result was a trade deficit of $31.31 billion in the previous fiscal year between India and Saudi Arabia.

Last year, Indian authorities actively promoted the use of the rupee abroad, and in July 2022, the RBI announced plans to establish a mechanism to settle global commerce in rupees. Oil from sanctioned Russia at a discount was apparently an early implementation of this strategy when Russia invaded Ukraine in February 2022. However, the mechanism has not gained traction, and there are now rumors that negotiations between India and Russia to settle their bilateral commerce in rupees have been suspended since Russia had amassed billions of rupees in Indian banks that it could not use.

In the past few months, India has inked a number of bilateral agreements to settle commerce in local currencies. Most recently, in the middle of July, an MoU was signed between India and the United Arab Emirates to establish a Local Currency Settlement System. It has also been discussed with Indonesia that cross-border transactions be settled in local currencies. To settle bilateral trade in local currencies, India may soon form alliances with Brazil, Argentina, South Africa, Senegal, and Tanzania, as reported exclusively by Moneypoise in August.

After talking about how to settle trade in local currencies, India and Saudi Arabia agreed to speed up talks on an India-Gulf Cooperation Council free trade agreement and increase cooperation in the financial technology sector, according to External Affairs Secretary Sayeed.

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Additionally, the two nations have determined a number of potential areas of cooperation. Some examples are the energy sector, the defense sector, the security sector, the education sector, the transportation sector, the healthcare sector, the tourism sector, the cultural sector, the space sector, and the semiconductor industry.