Column: Jay Changlani
India and New Zealand are strengthening their economic ties by using the Indian rupee and the Unified Payments Interface (UPI) for trade and financial deals instead of relying solely on the US dollar. The move towards non-dollar transactions is part of a wider trend to reduce the dependence on the dollar and improve the global financial order.
UPI is a real-time payment system developed by the National Payments Corporation of India, and it allows customers to send and receive money instantly using a smartphone. UPI has revolutionized the payment system in India, providing users with enhanced convenience, security, and speed. The system has become immensely popular in India, with more than 2 billion transactions worth over INR 5 trillion processed in July 2021 alone.
India and New Zealand have been making efforts to expand trade and economic ties beyond traditional sectors such as agriculture and education, and one way to achieve this goal is by facilitating the use of digital payments in trade deals. The use of UPI-enabled transactions could reduce the time and cost of financial transactions between the two countries, making it easier for businesses to engage in cross-border trade and investments.
Moreover, using the Indian rupee and UPI for trade transactions can also reduce the exposure of small and medium enterprises (SMEs) to currency risks. SMEs are often hesitant to enter foreign markets due to the complexities and uncertainties of the foreign exchange market, but by using local currencies and digital payment systems, they can mitigate the risks associated with currency fluctuations.
The move to use the Indian rupee and UPI for trade and financial transactions highlights the growing importance of India as a trading partner in the Asia-Pacific region. The Reserve Bank of New Zealand has already signed a memorandum of understanding with the Reserve Bank of India to collaborate on various issues including financial technology, payment and settlement systems, and regulatory issues.
In conclusion, the use of UPI and the Indian rupee for trade and financial transactions between India and New Zealand presents a significant opportunity to enhance bilateral economic ties. The shift towards non-dollar transactions demonstrates the increasing importance of digital payments and the evolving global financial landscape. By reducing transaction costs, easing currency risks, and increasing convenience and security, UPI-enabled transactions will help promote greater trade and investment flows between the two countries.
See article in Kia Ora India Magazine: https://issuu.com/inzbc/docs/kiaora_india_jun2023_v5_low/7