New Delhi: Terming Prime Minister Narendra Modi’s recent visit to the United Arab Emirates (UAE) as “a significant one,” Indian Ambassador to the UAE Sanjay Sudhir hailed the landmark initiatives between the two countries including trading in local currencies.

The two leaders Sheikh Mohamed bin Zayed Al Nahyan, President of the UAE and PM Modi on July 15 witnessed the exchange of MoUs between Reserve Bank of India and UAE Central Bank for the establishment of a framework to promote the use of local currencies (INR-AED) for cross-border transactions and another one for the bilateral cooperation on interlinking their payment and messaging systems.

“India and the UAE have been pioneers, whether it was Comprehensive Economic Partnership Agreement (CEPA) or the Rupee-Dirham trade mechanism. When we signed the CEPA it was the first CEPA ever for the UAE and India's first ever CEPA for any country of the Middle East”, said the Indian envoy in an interview with ANI.

“Now, just like that, the Rupee-Dirham mechanism which we have just signed, is the first one for both of us. In that sense, it's extremely significant. I actually see it as a paradigm shift in how we can make trade settlements”, he added.

The signing of the Local currency settlement (LCS) agreement took place during the recent visit of Prime Minister Narendra Modi to the UAE. PM Modi was warmly welcomed by Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, further reflecting the depth of bilateral relations between the two countries.

The implementation of the LCS system has already demonstrated its potential with a noteworthy transaction during the visit. In the first transaction under the newly implemented LCS system, a leading UAE gold exporter invoiced the sale of 25 kg of gold, valued at about Rs 12.84 crore.

“Gold exporters in the UAE sold 25 kilos of gold to Yes Bank and Federal Bank and the invoicing was done in rupees. The payment was made in rupees and the total amount was Rs 12.84 crores which is approximately Dollar 1.5 million. So, that transaction has already happened. And now the doors are open for all exporters and importers for both countries to make full use of this mechanism," said Sudhir.

Speaking further about the mechanism or the use of local currencies, the envoy said that the Indian Rupee and the UAE Dirham will actually reduce transaction costs and transaction time. So, this benefit will be an added benefit for exporters and importers.

“The mechanism will make use of the existing banking systems in our two countries. All the exporters and importers will actually have a choice now for the transactions in either Rupee or in Dirham based on their mutual agreement. And these amounts will be actually converted by financial intermediaries, which are these days the banks in this case to the two currencies, the rupee or Dirham”, said the envoy.

“Two kinds of accounts will facilitate this. One is the SNRR account which is the special non-resident rupee account or the Vostro account, the exchange rates will be market driven. And the mechanism covers all current account transactions, including all trade items like oil, including oil and permissible capital account transactions. It will also include investment in government securities, private securities, and other equities”, he added.

Talking further about CEPA, the envoy said that the results are there for all of us too as it has been about one year since CEPA has been in the force.

“CEPA has been in force for about one year, and the results are there for all to see. For the financial year 22-23, there was a hike in our bilateral trade of about 19 per cent and our bilateral trade actually shot up to USD 85 billion. CEPA gave a trade tariff preference. For instance, for our exporters to the UAE. It gave a tariff advantage of 5 per cent for all items covered under CEPA”, explained the envoy.

Marking strides in the educational sector, the envoy also hailed the MoU between the Ministry of Education of India, the Department of Education and Knowledge, Abu Dhabi and IIT Delhi for planning to establish IIT-Delhi - Abu Dhabi, UAE.

“UAE was actually the first country with which we started discussions on setting up a campus of IIT last year. At that time, the Indian Institute of Technology Delhi took the lead to set up this campus and we just witnessed the signing of the MoU putting that on form ground. A lot of work has already happened actually in this direction. The two sides have already decided on which courses to begin with. The first Master's course will begin in January next year and Bachelor's courses will begin in September next year. This will further increase the educational ties and it’s another feather in the cap of India - UAE relations”, said the envoy.

Stressing the fact that the offshore IIT campus will enhance India's educational reputation globally, as well as that of IIT-Delhi, the envoy believed that this will also "expand its international footprint’ and is likely to improve IIT-Delhi's global rankings due to the presence of international students, international research collaborations."

“While the student body will not be restricted to Indians, it would certainly serve the needs of the large Indian community in the UAE and the region whose children now travel abroad for quality professional education”, said the envoy.

Speaking about the high-level exchange between the two countries, the envoy said that Dr Sultan Al Jaber, President-designate of CoP28 would visit Goa, India on July 22 for the energy ministers meeting.

He will be in India again on July 28 and will reach Chennai for the environment ministers meeting.

The envoy termed these visits as “part and parcel of the deep, strong and growing relationship between the two countries.”