Union minister of Commerce and Industry Piyush Goyal and his Bangladeshi counterpart Tipu Munshi discussed the settlement of trade in Indian rupees in New Delhi on Thursday. The two countries will also likely develop a free trade agreement (FTA) soon.
“A joint feasibility study on a Comprehensive Economic Partnership Agreement (CEPA) has been carried out after the two countries agreed to explore a bilateral FTA,” said the commerce ministry.
Under CEPA, two countries either significantly reduce or eliminate customs duties on maximum numbers of goods traded between them. Besides, they ease norms for promoting trade in services and attracting investments.
India and Bangladesh agreed to start discussions on CEPA “at an early date” as it “would provide a sound basis for substantial enhancement of trade and commercial partnership”.
Other issues discussed were the removal of non-tariff barriers and the re-opening of border haats, among others.
“The ministers discussed various issues of mutual interest, including removal of non-tariff barriers and port restrictions, re-opening of border haats, harmonisation and mutual recognition of Standards and procedures on both sides, settlement of trade in Indian rupees, strengthening connectivity and trade infrastructure, among others, to realise the full potential of India-Bangladesh economic ties,” the ministry said.
“Given the India’s focus on energy security and associated high import costs, rupee trade is an effective way to mitigate the spillovers of this global change especially the challenges faced on account of currency volatility and reserve changes,”
India’s neighbours are increasingly aiming to adopt trade settlement in the Indian rupee.
Recently, a Sri Lankan bank opened a Vostro account with the State Bank of India (SBI).
“Happy to note that a Sri Lankan bank has opened a Vostro account with the State Bank of India to conduct bilateral trade in INR. The High Commissioner discussed this & related matters with South Asia Regional Head of SBI Mr Vikas Goel today,” the Indian embassy in Sri Lanka wrote on Twitter on Tuesday.
According to an earlier report by IANS, India is looking to expand the rupee trade in Africa, UAE, and Saudi Arabia as well. India and UAE have already started talks around the rupee settlement mechanism.
The bilateral trade between India and Bangladesh increased to $18.2 billion ($16.2 billion exports and $2 billion imports) in 2021-22 as against $10.8 billion in 2020-21.
Bangladesh is India’s biggest trade partner in South Asia. India is the second biggest export partner for Bangladesh accounting for 12 per cent of the total. China, with a share of 21.5 per cent, is the biggest export partner for Bangladesh.