Can rupee-riyal mechanism boost India's exports?

Minister Goyal discussed various trade-related issues with the Saudi Arabian minister during his recent visit and also attended the Ministerial meeting of the India-Saudi Arabia Strategic Partnership Council. The key points of discussion were diversification and expansion of trade and commerce; removal of trade barriers, including the outstanding issues related to sanitary and phytosanitary measures and trade remedies; automatic registration and marketing authorisation of Indian pharma products in Saudi Arabia; feasibility of institutionalising the rupee-riyal trade; and introduction of UPI and Rupay cards in Saudi Arabia among other things.

India is pushing international trade in local currency due to frequent geo-political issues. Earlier, it had set up a trade mechanism in local currency with Iran when the latter was granted access to export crude oil under ‘Oil for Food’ programme on humanitarian ground amid US restrictions.

Recently, Russian invasion in Ukraine prompted India to set up rupee-ruble payment mechanism. There were discussions between BRICS and some other trade blocs to establish mechanism to conduct trade in local currency to avoid trade disruptions due to US sanctions. Mostly countries, who are not aligned with the US, specifically in the recent times, are looking to reduce their dependency on the US dollar.

However, it is a quite different scenario in case of rupee-riyal trade. Saudi Arabia is a long-time ally of the US; therefore, it will be interesting to see whether the Middle Eastern country really takes an initiative to establish a trade system in the local currency.

Currently, Saudi Arabia is among the top 10 apparel buyers from India, accounting for 2.65 per cent of India's total apparel exports of $14.715 billion in 2021. India’s apparel exports were valued at $30.805 million in June, $25.859 million in May and $25,017 million in April 2022.

Fibre2Fashion News Desk (KUL)