India and the United Arab Emirates (UAE) have initiated discussions on expanding pharmaceutical trade and introducing a local currency settlement system to reduce reliance on the U.S. dollar. The move is expected to deepen bilateral economic ties, lower transaction costs, and boost resilience in cross-border trade.
These talks reflect the growing ambition of both nations to strengthen strategic partnerships under the Comprehensive Economic Partnership Agreement (CEPA) framework.
Pharma Sector in Focus
Pharmaceuticals are a key pillar of India’s export basket, and the UAE has emerged as an important gateway for distribution across the Middle East and Africa. Discussions are centered on:
Facilitating faster regulatory approvals for Indian pharma products.
Expanding supply chains for generics and life-saving drugs.
Positioning India as a reliable partner in healthcare resilience for the Gulf region.
The potential for collaboration is significant, given India’s manufacturing capacity and the UAE’s role as a regional logistics hub.
Local Currency Settlement System
Both countries are exploring the feasibility of settling trade transactions in Indian Rupees and UAE Dirhams, bypassing the U.S. dollar. This initiative aims to:
Reduce forex volatility and transaction costs.
Strengthen financial sovereignty for both nations.
Support smoother trade flows, particularly in high-volume sectors like energy, pharma, and consumer goods.
If implemented, the system could serve as a model for India’s broader push toward local currency trade agreements with other partners.
Policy and Strategic Perspective
The discussions align with India’s strategy of promoting currency diversification and reducing dependence on dollar-denominated settlements. For the UAE, it offers a way to strengthen regional financial integration while deepening economic ties with India.
This also complements both nations’ efforts under CEPA to expand trade beyond oil into new sectors such as healthcare, fintech, and renewable energy.
Why This Matters
For Exporters: Pharma companies gain access to smoother trade and lower costs.
For Policymakers: Enhances India’s financial resilience and trade diversification strategy.
For Global Trade: Signals a shift toward multipolar currency settlement systems.
The India–UAE discussions mark a step toward redefining bilateral trade, combining sectoral cooperation in pharma with financial innovation in currency settlement.
