Bangladesh and India Launch Trade Transactions in Rupees to Reduce Dollar Dependence
Bangladesh and India Launch Trade Transactions in Rupees
Bangladesh and India have begun trading in rupees, hoping to lessen dependency on the US dollar and strengthen regional currency and commerce. This bilateral trade agreement marks a significant milestone for Bangladesh, moving beyond the US dollar for trade settlement with a foreign country.
Daily Current Affairs Quiz: July 2023
Trade Settlement in Rupees: A Historic Step:
Bangladesh Bank Governor Abdur Rouf Talukder describes the introduction of rupee-based trade settlement as the “first step in a great journey.” The move signifies the growth and economic cooperation between India and Bangladesh, fostering mutual benefits.
Lower Transaction Fees and a Dual Currency Card:
The introduction of the Taka-Rupee dual currency card, expected to be launched from September, will further facilitate trade between the two countries. The dual currency card will help reduce transaction costs during trade with India, enhancing convenience for traders and strengthening economic ties.
Formalizing Trade in Rupees:
While border trading between Bangladesh and India has persisted in certain localities known as “border huts,” legitimate trade will now be done in rupees. Initially, the trade will be transacted in rupees, with a gradual shift towards using the Bangladeshi currency, Taka, as the trade gap decreases.
Nostro Accounts and Market-Based Exchange Rate:
Nostro accounts for foreign currency transactions have been issued to banks in both Bangladesh and India. The exchange rate will be determined based on market demand, ensuring transparency and efficiency in the trade process.
Trade Figures and Economic Outlook:
Bangladesh’s exports to India total USD 2 billion, while imports from India total USD 13.69 billion, according to official figures. Some economists express skepticism about the immediate benefits for Bangladesh due to the trade deficit. However, Governor Talukder emphasizes the broader impact on exporters and importers in both countries.