India and Bangladesh commencing cross-border trade settlement in Indian rupee (INR) would promote two-way commerce by reducing transaction cost, an industry official said on Sunday.
CII national committee on EXIM Sanjay Budhia said that since all exports and imports and settlement of trade transactions under this arrangement may be denominated and invoiced in INR, this would also reduce dependence on the US Dollar and would address situations like scarcity of forex reserves apart from strengthening regional currency and trade.
In July, Bangladesh and India launched trade transactions in rupees with the aim of reducing dependence on the US dollar and strengthening regional currency and trade.
This is the first time Bangladesh has done bilateral trade with a foreign country in addition to the US dollar.
"This would certainly promote the growth of trade between the nations and support the increasing interest of the global trading community in INR," Budhia said adding due to this arrangement, the transaction costs during trade between the countries will reduce which will boost the Indian exports to Bangladesh.
Bangladesh is currently facing scarcity of forex reserves and the provision of trade settlement in INR would greatly help address the situation resulting in increase in import demands from India, he said.
Trade settlement in INR alleviates exchange rate uncertainties for Indian enterprises by obviating the necessity of using USD in advance of conducting financial transactions and it would have similar effects on Bangladesh too, he added.
"This will go a long way in further enhancing the already significant economic relations between India and Bangladesh through economically efficient cross-border transactions," Budhia said.
Further he suggested creation of a technology fund through which the Government could fund R&D and innovation projects, with the private sector contributing 60 per cent and 40 per cent coming from the fund.
"Industry could look at taking business delegations to Bangladesh to better explore the market. The large enterprises could also provide handholding services to smaller entrepreneurs in their journey towards export excellence," he said.
The key sectors which would benefit from the development include cotton, spices, agri produce, leather, textiles, gems and jewellery, iron and steel and chemicals.
Bangladesh is India's biggest trade partner in South Asia and India is the second biggest trade partner of Bangladesh.
Banks in Bangladesh and India have been given permission to open nostro accounts, an account in a bank of another country for the purpose of foreign currency transactions.
According to the official data from Dhaka, exports from Bangladesh to India amount to USD 2 billion, while Bangladesh's imports from India are worth USD 13.69 billion.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)