India and Indonesia are seeking to settle bilateral trade in local currencies, according to sources.
India Finance Minister Nirmala Sitharaman met her Indonesian counterpart Sri Mulyani Indrawati before the recent G20 meeting in Gujarat, India. Besides discussion about trading with rupees and rupiahs, they also talked about connecting fast payment systems to support cross-border transactions.
An unnamed senior Indian government official said the discussions had reached an advanced stage, predicting that an announcement could come once both parties have completed formalities.
Indrawati has confirmed the meeting with Sitharaman, saying the new pact will strengthen trade and investment collaborations between India and Indonesia.
“We will continue to strengthen this bilateral relationship, especially for the two institutions, in policy dialogues that will discuss issues of trade, investment, including human resources,” said Indrawati in an official statement.
The news followed a similar agreement between India and the United Arab Emirates (UAE) over the weekend, which is expected to increase bilateral transactions in rupees and dirhams. India-UAE deal also enables the use of domestic credit cards in retail transactions.
India has connected its fast payment system with Singapore. Besides Indonesia, it is also in talks with Japan, France and several other countries about the potential of payment links. The recent agreements are part of India’s effort to internationalize its currency and reduce reliance on the U.S. dollar.
The Reserve Bank of India has also allowed several local banks to settle transactions in rupees with 18 nations since last year. Analysts note that trade volumes remained below $120 million despite the effort.
Countries like Indonesia remain interested in partnering with India because of the South Asian country’s rapid-growing economy and high demand for food commodities. According to Indrawati, tying up with India will shield Indonesia from the impact of China’s “lackluster” economic performance.
Recent de-dollarization trend
Over the years, countries have made attempts to reduce reliance on the U.S. dollar. BRICS nations — Brazil, Russia, India, China and South Africa — are at the forefront of the de-dollarization effort, as noted by analysts.
Rich Global founder Robert Kiyosaki predicted that the BRICS group would announce its new gold-backed digital currency at its summit in August. According to Kiyosaki, the new currency poses dire consequences for the greenback. He explained that it would make trillions of dollars “rush home,” and inflation soared.
BRICS nations have not confirmed the new currency. New Development Bank vice president and chief financial officer Leslie Maasdorp said creating a common currency is not in the bloc’s immediate plans, saying it is a “medium to long-term ambition” of the member nations.
“No one is suggesting right now that BRICS will form an alternate currency,” said Massdorp.
“All we are suggesting is that we need to deepen the use of local currencies of our member countries, and over time that is going to strengthen our ability to immunize or insulate our economies from the devaluation of our currencies if we borrow in dollars, for example.”
Kiyosaki advised investors to be careful about their future planning. He warned about the potential stock market crash if the U.S. economy hit a recession. The businessman pointed out that the resolution of the debt ceiling issue fueled the recent stock rally.
The “Rich Dad, Poor Dad” author also said the regional banking crisis in the U.S. is not over, predicting that there will be more bank failures soon. The U.S. housing situation can also create another financial turmoil, said Kiyosaki. He said the 2008 financial crisis would pale compared to the upcoming crisis.
Kiyosaki said gold, silver and Bitcoin had better prospects in the case of economic uncertainty, suggesting investors “stock up” on these assets. He predicted that Bitcoin would hit $120,000 per token by 2024. The digital token currently trades around $30,300.