According to a statement released after the talks, “the Indian side highlighted the potential in service sector cooperation and suggested cooperation in IT, financial services, education sector, tourism, healthcare, tele-medicine, medical tourism, and start-up ecosystem.” The Indian side also proposed establishing Mutual Recognition Agreements (MRAs) on professional services, internationalising the RuPay card, and implementing a QR-based payment system.

Last month, New Delhi and the United Arab Emirates signed a memorandum of understanding (MoU) to settle bilateral transactions in rupees and dirhams. In mid-July, on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting in Gandhinagar, India, the two countries also discussed a local currency settlement plan.

India hopes that by negotiating local currency settlement pacts, it can increase the use of the rupee as a means of payment for international trade.

New Delhi’s total commerce with the Association of Southeast Asian Nations (ASEAN) in 2022-23 would be dominated by transactions with Vietnam, India’s fifth largest trading partner among ASEAN countries. According to the statement, “Vietnam is an important destination for India’s iron & steel as well as agricultural and animal products, mainly meat products, animal fodder, cereals, and marine products.”

Both parties agreed to hold regular and sustained bilateral discussions aimed at resolving market access issues and technical barriers faced by exporters in the areas of agriculture, fisheries, textiles, footwear, pharmaceuticals, chemicals, and fertilisers, among others, identified as key sectors for expanding trade cooperation.

“Both sides reviewed the progress on bilateral trade and economic cooperation and discussed ways to unlock the vast untapped potential in bilateral trade to enable the business communities from the two sides to benefit from the partnership of two of the fastest growing economies,” the statement read.

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The Indian rupee finished at 82.75 to the dollar, up 0.11 percent from its previous close of 82.84. The rupee opened at 82.72 to the dollar.

The Reserve Bank of India’s (RBI) monetary policy meeting is set for August 8-10. On August 11, the CPI inflation for July, industrial production, and manufacturing production figures for June will be announced.

This week, the market’s focus has switched to inflation statistics from the world’s two largest economies, the United States and China. As a result, all eyes will be on the US Producer Price Index (PPI) as well.

“Foreign Portfolio Investor (FPI) flows and the RBI’s persistent pressure on the USD may shape the currency’s performance, making it less likely for the rupee to depreciate beyond the 82.80-90 range.” The current sentiment implies a likely advance towards the 82.20-82.00 range, indicating a degree of steadiness in the currency’s outlook. In this scenario, exporters are recommended to capitalise on any prospective dollar-rupee upticks and investigate selling opportunities, while importers are advised to exercise prudence and wait for suitable hedging options,” said Amit Pabri of CR Forex in a letter to clients.

On August 7, Asian currencies were trading in a mixed bag. The South Korean won increased by 0.67 percent, the Philippine peso by 0.16 percent, and the Taiwan dollar increased by 0.08 percent. China’s Renminbi fell 0.26 percent, the Japanese yen 0.24 percent, and the Thai Baht 0.06 percent.

The dollar index, which gauges the strength of the US currency against various currencies, was trading at 102, down 0.06 percent from its previous close of 102.02.

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In the past, all international transactions between Bangladesh and any other country had been conducted through the US dollar. Trade settlement in rupees was hailed as the “first step in a great journey” by Bangladesh Bank Governor Abdur Rouf Talukder. Indian High Commissioner Pranay Verma was also there for the event, and he remarked that “the trade position between India and Bangladesh has seen remarkable growth,” thanks to the two countries working together economically.

The governor of the central bank recently announced that a dual currency card accepting both the Taka and the Indian Rupee would be released in September, thereby lowering transaction costs for trade with India. However, Bangladesh and India do semi-officially stage frontier trading in specific localities dubbed “border hut,” where modest amounts of both currencies are exchanged. Under the new formal arrangement, officials have stated that from this point forward, trade will initially be conducted in rupee and then progressively in the Bangladeshi currency of Taka upon the trade disparity between the two countries diminishing.

Nostro accounts, or accounts in the banks of other countries, have been made available to financial institutions in Bangladesh and India for the purpose of conducting foreign currency transactions. Banks and market demand will factor into the final exchange rate, according to the officials involved. The most recent Dhaka statistics show that Bangladesh buys from India at the tune of USD 13.69 billion, while exports to India are USD 2 billion. However, several economists have warned that Bangladesh’s trade imbalance may prevent it from immediately reaping the benefits of the new system.

Nonetheless, Talukder stated that he was investigating more than just this USD 2 billion transaction because “we export and import in Indian rupees, it will have an effect on the exporters and importers in both countries.””We can significantly increase our exports because Indian consumers will be able to pay in Indian rupees and treat our goods as if they were made in India.”India is a sizable market, thus this will provide us with a significant opportunity. According to India’s ambassador to Bangladesh, bilateral ties have undergone “substantial transformation” during the past decade. “One of the most important manifestations of that transformation is our visibly growing economic and commercial ties and connectivity links,” he said, adding that Bangladesh is India’s largest trade partner in South Asia and the fifth largest globally.

Trade between the two countries has doubled in the last five years, he said. Over the past three fiscal years, annual shipments to India have exceeded $1 billion, and in the most recent fiscal year, they broke $2 billion. Bangladesh’s primary export market in Asia is now India, thanks to its large and varied consumer base.

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