Unlocking Bilateral Trade: India and Myanmar Explore Rupee-Kyat Currency Mechanism

In a strategic move to bolster economic ties, India and Myanmar have engaged in discussions to promote bilateral trade through the use of their respective local currencies, the Indian Rupee and the Myanmar Kyat. The talks, held on the sidelines of the 12th East Asia Summit Economic Ministers' Meeting in Vientiane, Laos, aimed to explore innovative ways to streamline cross-border transactions and reduce associated costs.

Forging a Stronger Economic Partnership

Exploring Potential Cooperation Sectors

The meeting between India's Commerce and Industry Minister, Piyush Goyal, and Myanmar's Minister of Investment and Foreign Economic Relations, Kan Zaw, delved into the possibilities of enhanced cooperation in various sectors. The discussions centered around areas such as lentils, diesel, gasoline, and electric vehicles, highlighting the potential for mutually beneficial trade opportunities.By leveraging the Rupee-Kyat currency mechanism, the two nations seek to facilitate smoother trade flows and minimize the need for currency conversions, ultimately reducing transaction costs. This strategic move aligns with India's broader efforts to promote trade in local currencies with other countries, including the United Arab Emirates, African nations, and Russia.

Addressing Bilateral Trade Dynamics

The bilateral trade between India and Myanmar stood at USD 1.75 billion in the fiscal year 2023-24, underscoring the significance of strengthening economic ties between the two neighbors. While India's exports to Myanmar dipped from USD 807 million in the previous year to USD 670.4 million in 2023-24, the country's imports from Myanmar increased from USD 954.74 million to USD 1.07 billion during the same period.India's reliance on imports of pulses, such as lentils, tur, and urad, from Myanmar to meet domestic demand has been a key driver of this trade relationship. The government has taken steps to ease and simplify the payment mechanism for traders importing these commodities, further streamlining the process.

Leveraging the Rupee-Kyat Payment System

In a significant development, the Central Bank of Myanmar released guidelines for payment procedures under the Special Rupee Vostro Account (SRVA) on January 26, 2024. This move paves the way for the implementation of the Rupee-Kyat direct payment system, which aims to facilitate seamless transactions between the two countries.The SRVA mechanism, facilitated through Punjab National Bank, allows importers to utilize the Rupee-Kyat direct payment system, eliminating the need for currency conversions and reducing associated costs. This innovative approach aligns with India's broader strategy of promoting trade in local currencies, which has been particularly beneficial for countries facing foreign exchange shortages due to the post-COVID-19 decline in exports and tourism, as well as those affected by US sanctions.

Addressing Foreign Exchange Challenges

The move towards the Rupee-Kyat currency mechanism is particularly timely, as it addresses the challenges faced by countries in Africa and South Asia due to foreign exchange shortages. According to the think tank GTRI, the introduction of the SRVA system by the Reserve Bank of India was aimed at aiding these nations struggling with the aftermath of the COVID-19 pandemic and the impact of US sanctions.By facilitating trade in local currencies, the Rupee-Kyat mechanism has the potential to alleviate the burden of foreign exchange constraints, allowing for more efficient and cost-effective cross-border transactions. This strategic collaboration between India and Myanmar could serve as a model for other nations seeking to strengthen their economic ties and navigate the complexities of the global trade landscape.