Business & Economy

In Blow to US Dollar, India and Bangladesh to Launch Trade in Local Currencies

© AFP 2023 DANIEL MUNOZPicture of a one hundred US dollar bill next to Colombian one hundred thousand peso bills taken in Bogota, on October 24, 2022
Picture of a one hundred US dollar bill next to Colombian one hundred thousand peso bills taken in Bogota, on October 24, 2022 - Sputnik India, 1920, 15.05.2023
Bangladesh is India’s biggest trading partner in South Asia and New Delhi is the second biggest trade partner of Dhaka in Asia.
India and Bangladesh will start trading in local currencies in coming weeks, a Bangladesh Bank official has told Sputnik.
“There is no fixed timeline as to when the trading in national currencies will begin but we hope to begin in a month or two,” Mezbaul Haque, an Executive Director at Bangladesh Bank, the country’s central bank, said.
He noted that the governors of the Bangladesh Bank, Abdur Rouf Talukder, and the Reserve Bank of India (RBI), Shaktikanta Das, discussed the matter at a meeting on the margins of the G-20 Finance Ministers and Central Bank Governors (FMCBG) meeting in Bengaluru in February.
Bangladeshi Prime Minister Sheikh Hasina - Sputnik India, 1920, 13.05.2023
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Talukdar has said that trade settlement in Indian Nation Rupee (INR) and Taka would reduce the pressure on foreign currency and bring down transaction costs, as per reports in Bangladesh media.
At present, the US dollar is the predominant currency of trade between the two countries. The US dollar is converted to respective national currency, a process that incurs exchange market losses.
According to data available with India’s Ministry of External Affairs (MEA), bilateral trade touched $18.14 billion in 2021-22, with Indian exporting products worth over $16 billion to its eastern neighbour.

Bangladesh’s officials are also of the view that the trade in local currencies would bring down cost of travel to India, given that many Bangladesh citizens visit the eastern neighbor for tourism, education, and availing medical treatment.

As per a Bangladesh government report, around $2 billion is spent annually by citizens travelling to India.

India’s Push to De-Dollarize

The activation of trading in local currencies between India and Bangladesh is in line with New Delhi’s ongoing push to move away from the US dollar, in the wake of trading disruptions caused by western sanctions against Moscow last year.
Besides India, other major economies such as China as well as many small and medium-income nations are also actively pursuing the option of trade in local currencies to circumvent the sanctions and shield themselves from other future disruptions.
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De-Dollarization Marches Ahead as India's New Foreign Trade Policy to Encourage Rupee
The Indian government is in touch with around 19 countries in a bid to move towards trading in local currencies.
New Delhi is in talks with nearly 19 countries to trade in local currencies, which India says will overcome disruptions in trade caused by western sanctions and other external factors.
India’s new Foreign Trade Policy (FTP) for 2023-28 unveiled this year seeks to “encourage” trade in rupee to bolster the international stature of the Indian currency.