India and the United Arab Emirates (UAE) have taken a significant step by initiating trade using their respective local currencies, moving away from the dominant use of the US dollar in international transactions.
The decision to accept native currencies could be taken at the upcoming BRICS summit in October in the Kazan region of Russia. Notably, India is keen on using local currencies only when they are “non-binding”.
Recently, Indian Oil Corporation purchased one million barrels of oil from the Abu Dhabi National Oil Company using Indian rupees instead of the US dollar. Similarly, a UAE gold exporter sold 25 kg of gold to an Indian buyer for approximately ₹12.8 crore ($1.54 million) in a similar currency-to-currency exchange.
This trend reflects a broader global effort to reshape the international financial system and reduce dependence on the US dollar. Other influential countries, including China and Russia, have also expressed interest in de-dollarization due to concerns over aggressive US sanctions and foreign policies.
While the US dollar remains dominant, this shift highlights the growing importance of local currencies in cross-border trade and investment transactions.
Using local currencies for trade offers several advantages. For an instance, when trading in local currencies, businesses avoid exposure to exchange rate fluctuations. This stability can enhance predictability and reduce financial risk.
Moreover, by bypassing the need to convert currencies, companies save on transaction fees, currency conversion charges, and other related costs.
To recall, in March it was reported that BRICS, the five Nations group comprising Brazil, Russia, India, China, and South Africa, will work to create an independent payment system based on digital currencies and blockchain.
In May this year, Iran confirmed its collaboration with Russia on developing Central Bank Digital Currencies (CBDC) and tokenized assets for payments.
