NEW DELHI, July 15 (Reuters) - India has signed an agreement with the United Arab Emirates that will allow it to settle trade in rupees instead of dollars, boosting India’s efforts to cut transaction costs by eliminating dollar conversions.
During a visit by India’s Prime Minister Narendra Modi to the UAE on Saturday, the two countries also agreed to set up a real-time payment link to facilitate easier cross-border money transfers.
The two agreements will enable “seamless cross-border transactions and payments, and foster greater economic cooperation”, said a statement from the Reserve Bank of India on Saturday.
I agree they’re not the same, but the impact on the perception of the currency was similar, especially domestically, nobody wants to think their money can be made worthless tomorrow.
Oh the impact was not uncertainty on INR.
Not many were worried the Indian rupee would crumble, if so there would have been a greater scramble to convert to other currencies or to precious metals, etc. Instead people were still queuing up to deposit in their INR bank accounts. So confidence on the rupee didnt seem affected much, especially domestically.
Rather the impact of the lack of spendable currency is believed to have lowered the GDP and low spending affected businesses.
On the other hand, many with black money were scrambling to purchase expensive goods in places that were still accepting the cash. That probably hides the true impact on the common people, given how above 96% of the circulating cash was returned, proving the blackmoney was successfully laundered.