India and Myanmar Explore Strategies to Enhance Trade Using Local Currencies

India and Myanmar recently explored enhancing trade using their local currencies, the rupee and kyat. This discussion took place between Commerce and Industry Minister Piyush Goyal and Myanmar's Minister of Investment and Foreign Economic Relations, Kan Zaw. The meeting occurred during the 12th East Asia Summit Economic Ministers Meeting in Vientiane, Laos.

Representative image

India is actively seeking to boost trade in local currencies with several countries, including the UAE, African nations, and Russia. Trading in local currencies can lower transaction costs by eliminating the need for dual currency conversions. In July 2022, the Reserve Bank of India introduced a system for settling international trade transactions in Indian Rupees (INR).

Trade Mechanism and Bilateral Cooperation

Goyal highlighted potential cooperation areas such as lentils, diesel, gasoline, and electric vehicles. He mentioned promoting bilateral trade through a Rupee-Kyat currency mechanism on social media platform X. This initiative aims to strengthen economic ties between the two nations by simplifying financial transactions.

India's bilateral trade with Myanmar was valued at USD 1.75 billion in 2023-24. However, India's exports to Myanmar decreased to USD 670.4 million from USD 807 million the previous year. Meanwhile, imports from Myanmar rose to USD 1.07 billion last fiscal year from USD 954.74 million in 2022-23.

Import Dynamics and Payment Systems

India imports pulses like lentils, tur, and urad from Myanmar to meet domestic demand. Additionally, India sources agricultural commodities from countries such as Australia, Canada, Mozambique, Tanzania, Sudan, and Malawi. In April, the government simplified the payment mechanism for traders importing pulses from Myanmar.

The consumer affairs ministry stated that importers should use the Rupee/Kyat direct payment system via Special Rupee Vostro Account (SRVA) through Punjab National Bank. This streamlined process aims to facilitate smoother transactions for pulse imports from Myanmar.

According to think tank GTRI, India's move to promote local currency trading supports countries in Africa and South Asia facing foreign exchange shortages due to post-Covid export declines and US sanctions. The Central Bank of Myanmar issued guidelines for SRVA payment procedures on January 26, 2024.

India's reliance on pulse imports is crucial to address domestic shortages. The country continues to import tur and urad dals from Myanmar to meet its needs effectively. This ongoing collaboration underscores the importance of maintaining strong trade relations between India and Myanmar.

The discussions between India and Myanmar reflect a broader strategy to enhance economic cooperation through local currency trade mechanisms. By reducing transaction costs and simplifying payment processes, both nations aim to foster stronger economic ties and mutual benefits in various sectors.