Hindi English Translation || Editorial || Eye on Emirati flows: on the new India-UAE framework and rupee-dirham transactions

Eye on Emirati flows: on the new India-UAE framework and rupee-dirham transactions

There are both risks and benefits in the rupee-dirham settlement system

The Reserve Bank of India (RBI) and the Central Bank of the UAE agreed on July 15 to establish (स्थापित करना, शुरू करना) a framework for enabling (सक्षम बनाना) the use of the two countries’ local currencies for cross-border (सीमा पार) transactions. The move (कदम, कार्रवाई) towards permitting payments in the Indian rupee and the UAE dirham is aimed at promoting their use bilaterally (द्विपक्षी), thus reducing the dependence on a third country’s currency such as the U.S. dollar as an intermediary (मध्यस्थ) for settling transactions. As per the memorandum of understanding (समझौता ज्ञापन) between the two central banks (केंद्रीय बैंक), all current account payments, including those involving the two countries’ exporters and importers, and certain “permitted” capital account (पूंजीगत खाता) transactions could be settled using either the rupee or the dirham. To facilitate settlement (समझौता), the two banks are set to put in place (to implement, to establish) a Local Currency Settlement System and likely, at a later date, interlink their payments messaging systems. An immediate beneficial consequence (परिणाम, प्रभाव) of the establishment (setting up, formation, creation) of the settlement mechanism (तंत्र, प्रक्रिया) would be the development (विकास, प्रगति) of a rupee-dirham foreign exchange (विदेशी मुद्रा) market that would help in pricing the two currencies independent of their exchange rates with other currencies such as the dollar and the euro. Indian and Emirati (relating to the United Arab Emirates; relating to the United Arab Emirates’ citizens) businesses would not need to factor in (include something, consider something (as a relevant element)) exchange rate risks when quoting to supply goods or services to buyers in the other country, improving the ease of doing business and boosting trade.

The India-UAE local currency settlement system could also potentially (likely, possibly, probably, may be) serve as (act as, function as) a precursor (a thing that comes before another one; forerunner, predecessor, harbinger) for other bilateral (involving two groups or countries) currency accords (treaty, agreement, settlement, deal) which, as an RBI Inter-Departmental Group (An Inter-Departmental Group (IDG) of the Reserve Bank of India (RBI) was formed to examine the internationalisation of the rupee) suggested this month, could act as an important first step for the internationalisation (the action/process of making something to become international) of the rupee. While the idea is laudable (praiseworthy, commendable, admirable, excellent), its actual success will hinge on (depend on, be based, be dependent) the extent of adoption (approval, endorsement, acceptance, validation, support, choosing) by businesses in both nations. With the UAE’s trade surplus (it occurs when the value of a country’s exports exceeds that of its imports) with India widening (increase, expand, develop, enlarge) in the months since the bilateral Comprehensive Economic Partnership Agreement came into effect in May 2022, Emirati businesses need to see remunerative (lucrative, profitable, profit-making, high-paying, rewarding) avenues (method, way) to deploy the potential (possible, likely, probable) rupee flows should they opt to receive payments in the Indian currency. One possibility (potentiality, probability, achievability, practicability, feasibility), as the RBI indicated, was stepped up (increase, intensify; quicken, speed up, accelerate) investment by UAE-based firms. The other possibility is of the UAE coming to serve as a currency entrepôt (an intermediary storage facility (in a port) where goods are kept temporarily for distribution within a country or for re-export) by enabling Indian businesses, dealing for instance (for example) with Russian suppliers, to use the West Asian country and dirham as a gateway (a network/interface through which money transactions can be transferred) for such transactions. Given (considering, taking into account, bearing in mind) that the UAE’s predecessor entity (establishment, structure, system), the Trucial States (The Trucial States, which became the United Arab Emirates in 1971, originally consisted of six sheikhdoms on the southern coast of the Persian Gulf: Abu Dhabi; Ajman; Dubai; Ras al-Khaima; Sharjah; and Umm al-Quwain. (“Sheikhdom” means “a region ruled by a sheikh”)), used the Indian rupee and later the Gulf rupee as de facto currency until the mid 1960s, it may appear natural to reestablish currency ties (association, relationship, bond, connection). Still, in a rapidly evolving (develop, advance, adapt (gradually)) global environment, businesses will base (form, found, establish, derive from (on a particular principle/idea)) their decisions on cold economic logic and policymakers must remain cognisant (aware, well informed about, familiar with) of the risks emanating (emerge, ensue, come out, arise, originate, stem out) from such moves even as they eye (look at, contemplate, keep watch on, keep tabs on) the opportunities.

Courtesy: The Hindu

Important Word List With Meaning

1.eye on (phrasal verb)

Hindi Meaning - नज़र रखना
English Meaning - watch carefully & closely.

2.establish (verb)

Hindi Meaning - स्थापित करना, शुरू करना
English Meaning - start, begin, set up, initiate, form, create.

3.enable (verb)

Hindi Meaning - सक्षम बनाना
English Meaning - make possible, allow, permit; make operational, activate.

4.cross-border (adjective)

Hindi Meaning - सीमा पार
English Meaning - across a border between two states/countries.

5.move (noun)

Hindi Meaning - कदम, कार्रवाई
English Meaning - action, act, step, measure.

6.bilaterally (adverb)

Hindi Meaning - द्विपक्षी
English Meaning - between the two countries involved.

7.intermediary (noun)

Hindi Meaning - मध्यस्थ
English Meaning - agent, broker, middleman.

8.memorandum of understanding (MoU) (noun)

Hindi Meaning - समझौता ज्ञापन
English Meaning - a formal (written) agreement between two (bilateral) or more (multilateral) parties outlined in a formal document.

9.central bank (noun)

Hindi Meaning - केंद्रीय बैंक
English Meaning - the banking regulator of a county’s banking system. (e.g. The Reserve Bank of India (RBI) is the central bank of India).

10.capital account (noun)

Hindi Meaning - पूंजीगत खाता
English Meaning - it refers to the general ledger (account book) that records the transactions related to owners’ funds.

11.settlement (noun)

Hindi Meaning - समझौता
English Meaning - transaction, payment.

12.consequence (noun)

Hindi Meaning - परिणाम, प्रभाव
English Meaning - outcome, result, effect, reaction; ramification, repercussion.

13.mechanism (noun)

Hindi Meaning - तंत्र, प्रक्रिया
English Meaning - system, arrangement, scheme, policy, regime; apparatus, medium, agency, instrument, channel.

14.development (noun)

Hindi Meaning - विकास, प्रगति
English Meaning - progress, progression, advancement, improvement, growth.

15.Foreign exchange (Forex) (noun)

Hindi Meaning - विदेशी मुद्रा
English Meaning - it refers to exchanging the currency of one country for another at prevailing exchange rates.

16.Emirati (adjective)

English Meaning - relating to the United Arab Emirates; relating to the United Arab Emirates’ citizens.

17.(cash) flow (noun)

English Meaning - it refers to the inflow and outflow of cash and cash equivalents.

18.framework (noun)

English Meaning - structure, formation, scheme, system, set-up.

19.facilitate (verb)

English Meaning - assist, help, aid, promote, ease, make easy, make possible.

20.set to (adjective)

English Meaning - ready, prepared, equipped, primed.

21.put in place (phrase)

English Meaning - to implement, to establish.

22.Local Currency Settlement System (LCSS) (noun)

English Meaning - The creation of a Local Currency Settlement System (LCSS) will enable exporters and importers to invoice and transact in their respective domestic currencies, fostering their foreign exchange market.

23.establishment (noun)

English Meaning - setting up, formation, creation.

24.foreign exchange market or Forex market (noun)

English Meaning - it is the largest and most liquid financial market in the world. It is where different currencies are bought and sold, with the exchange rate determining the value of each currency relative to another.

25.factor in (phrasal verb)

English Meaning - include something, consider something (as a relevant element).

26.Ease of Doing Business (EoDB) Index (noun)

English Meaning - it is an index annually published by the World Bank. Economies (i.e., countries) are ranked on their ease of doing business, from 1–190 ranking. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm.

27.potentially (adverb)

English Meaning - likely, possibly, probably, may be.

28.serve as (verb)

English Meaning - act as, function as.

29.precursor (noun)

English Meaning - a thing that comes before another one; forerunner, predecessor, harbinger.

30.bilateral (adjective)

English Meaning - involving two groups or countries.

31.accord (noun)

English Meaning - treaty, agreement, settlement, deal.

32.Inter-Departmental Group (IDG) (noun)

English Meaning - An Inter-Departmental Group (IDG) of the Reserve Bank of India (RBI) was formed to examine the internationalisation of the rupee.

33.internationalisation (noun)

English Meaning - the action/process of making something to become international.

34.laudable (adjective)

English Meaning - praiseworthy, commendable, admirable, excellent.

35.hinge on (verb)

English Meaning - depend on, be based, be dependent.

36.adoption (noun)

English Meaning - approval, endorsement, acceptance, validation, support, choosing.

37.trade surplus (noun)

English Meaning - it occurs when the value of a country’s exports exceeds that of its imports.

38.surplus (noun)

English Meaning - the amount of an asset or resource that exceeds the portion that’s actively utilized.

39.widen (verb)

English Meaning - increase, expand, develop, enlarge.

40.Comprehensive Economic Partnership Agreement (CEPA) (noun)

English Meaning - a free trade agreement (FTA) between two countries.

41.come into effect (phrase)

English Meaning - come into force, become applicable, become operative, be effective (a new law, rule, change, etc.).

42.remunerative (adjective)

English Meaning - lucrative, profitable, profit-making, high-paying, rewarding.

43.avenue (noun)

English Meaning - method, way.

44.deploy (verb)

English Meaning - use, utilize, employ, exploit, make use of, take advantage of.

45.potential (adjective)

English Meaning - possible, likely, probable.

46.possibility (noun)

English Meaning - potentiality, probability, achievability, practicability, feasibility.

47.step up (phrasal verb)

English Meaning - increase, intensify; quicken, speed up, accelerate.

48.entrepôt (noun)

English Meaning - an intermediary storage facility (in a port) where goods are kept temporarily for distribution within a country or for re-export.

49.for instance (phrase)

English Meaning - for example.

50.gateway (noun)

English Meaning - a network/interface through which money transactions can be transferred.

51.given (preposition)

English Meaning - considering, taking into account, bearing in mind.

52.predecessor (noun as modifier)

English Meaning - a thing that existed before another one.

53.entity (noun)

English Meaning - establishment, structure, system.

54.Trucial States (noun)

English Meaning - The Trucial States, which became the United Arab Emirates in 1971, originally consisted of six sheikhdoms on the southern coast of the Persian Gulf: Abu Dhabi; Ajman; Dubai; Ras al-Khaima; Sharjah; and Umm al-Quwain. (“Sheikhdom” means “a region ruled by a sheikh”).

55.de facto (adjective)

English Meaning - actual, real, exiting, effective.

56.ties (noun)

English Meaning - association, relationship, bond, connection.

57.evolve (verb)

English Meaning - develop, advance, adapt (gradually).

58.environment (noun)

English Meaning - situation, background, backdrop, scenario, atmosphere, context.

59.base (verb)

English Meaning - form, found, establish, derive from (on a particular principle/idea).

60.cold (adjective)

English Meaning - impersonal, dispassionate, unemotional, indifferent, uncommunicative, unresponsive, formal.