India and Iraq have begun to explore the possibility of trading in their local currencies, said India’s commerce and industry minister Anand Sharma.
Such a move would insulate India’s oil imports from Iraq from the volatile movement of the Indian rupee (INR) against the US dollar (USD).
“We are exploring the possibility of trading in local currencies, the [Iraqi] dinar [IQD] and rupee,” said Sharma. “Our officials will discuss this,” he told a session organised by Indian business chambers with Iraqi prime minister Nouri Kamil al-Maliki.
The INR has lost 17% against the US dollar since May, leading a global selloff in emerging market currencies on fears of higher borrowing costs and tighter supplies of cheap cash from the US.
Iraq’s prime minister also assured industry that his government was aware of exchange-related problems. “We are working to resolve the problem,” he said.
Sharma also spoke of Iraq’s growing importance in meeting India’s energy needs. “Iraq has emerged as the second largest exporter of oil to India. In the coming months, no doubt it will compete for the top spot,” he said.
India imported 24m tonnes of crude from Iraq in 2012-13, which was the second-biggest supplier after Saudi Arabia. Iraq toppled Iran as the second largest supplier of oil to India last year, following US and European Union (EU) sanctions on the country.
Pharmaceuticals, health services, IT and auto components are the other areas where Iraq holds huge opportunities for Indian business, Sharma added.
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